EXHIBIT 3
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 10, 2001
among
XXXXXXXXXXX ACQUISITION CORP.,
XXXXXX ACQUISITION CORP.
and
TREMONT ADVISERS, INC.
NY2:\1061790\01\MR@601!.DOC\66351.0004
TABLE OF CONTENTS
PAGE
----
Article I DEFINITIONS.....................................................................................2
1.1 Definitions..........................................................................................2
Article II THE MERGER.....................................................................................11
2.1 The Merger..........................................................................................11
2.2 Closing.............................................................................................11
2.3 Effective Time......................................................................................11
2.4 Effects of the Merger...............................................................................11
2.5 Certificate of Incorporation........................................................................11
2.6 By-Laws.............................................................................................12
2.7 Officers and Directors of Surviving Corporation.....................................................12
2.8 Effect on Capital Stock; Merger Consideration.......................................................12
2.9 Stock Options.......................................................................................13
2.10 Further Assurances..................................................................................14
Article III EXCHANGE OF CERTIFICATES.......................................................................14
3.1 Exchange Fund.......................................................................................14
3.2 Exchange Procedures.................................................................................15
3.3 No Further Ownership Rights in Company Common Stock.................................................15
3.4 Termination of Exchange Fund........................................................................15
3.5 No Liability........................................................................................15
3.6 Investment of the Exchange Fund.....................................................................16
3.7 Lost Certificates...................................................................................16
3.8 Withholding Rights..................................................................................16
3.9 Stock Transfer Books................................................................................16
Article IV REPRESENTATIONS AND WARRANTIES.................................................................17
4.1 Representations and Warranties of the Company.......................................................17
4.2 Representations and Warranties of the Parent and the Merger Sub.....................................38
Article V COVENANTS RELATING TO CONDUCT OF BUSINESS......................................................41
5.1 Covenants of the Company............................................................................41
5.2 Advisory Agreement Consents.........................................................................45
5.3 Acquisition Proposals...............................................................................46
i
TABLE OF CONTENTS
(CONTINUED)
5.4 Obtaining Required Company Vote.....................................................................48
5.5 Access to Information...............................................................................48
5.6 Covenants of the Parent.............................................................................49
5.7 Offers of Employment................................................................................49
5.8 Employee Benefits...................................................................................50
5.9 Directors' and Officers' Indemnification and Insurance..............................................50
5.10 Retention Plan and Bonus Pool.......................................................................52
5.11 Mutual Covenants of the Company and the Parent......................................................52
5.12 Revenue Run Rate....................................................................................55
5.13 Tangible Net Worth..................................................................................56
5.14 Employment Agreements...............................................................................56
Article VI CONDITIONS PRECEDENT...........................................................................56
6.1 Conditions to Each Party's Obligation to Effect the Merger..........................................56
6.2 Additional Conditions to Obligations of Company.....................................................56
6.3 Additional Conditions to Obligations of the Parent and the Merger Sub...............................57
Article VII TERMINATION....................................................................................58
7.1 Termination.........................................................................................58
7.2 Effect of Termination...............................................................................60
7.3 Payment by the Company..............................................................................60
Article VIII GENERAL PROVISIONS.............................................................................61
8.1 Non-Survival of Representations, Warranties and Agreements..........................................61
8.2 Amendment...........................................................................................61
8.3 Extension; Waiver...................................................................................61
8.4 Notices.............................................................................................61
8.5 Interpretation......................................................................................63
8.6 Counterparts........................................................................................63
8.7 Entire Agreement; Third Party Beneficiaries.........................................................63
8.8 GOVERNING LAW.......................................................................................63
8.9 VENUE...............................................................................................63
ii
TABLE OF CONTENTS
(CONTINUED)
8.10 WAIVER OF JURY TRIAL................................................................................64
8.11 Severability........................................................................................64
8.12 Assignment..........................................................................................64
8.13 Enforcement.........................................................................................65
8.14 Other Agreements....................................................................................65
iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 10, 2001
(this "Agreement"), among XXXXXXXXXXX ACQUISITION CORP., a Delaware corporation
(the "Parent"), XXXXXX ACQUISITION CORP., a Delaware corporation and a wholly
owned Subsidiary of the Parent (the "Merger Sub"), and TREMONT ADVISERS, INC., a
Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Parent,
the Merger Sub and the Company have each determined that this Agreement and the
merger of the Merger Sub with and into the Company (the "Merger") in accordance
with the provisions of this Agreement are advisable and in the best interests of
their respective stockholders, and such Boards of Directors have approved such
Merger, upon the terms and subject to the conditions set forth in this
Agreement, pursuant to which each share of Company Common Stock (as defined in
Section 4.1(c)(i)(B)) issued and outstanding immediately prior to the Effective
Time (as defined in Section 2.3) (other than shares of Company Common Stock that
are owned or held directly or indirectly by the Parent or the Company which
shall be canceled as provided in Section 2.8(c), and Dissenting Shares (as
defined in Section 2.8(e)) will be converted into the right to receive the
Merger Consideration (as defined in Section 2.8(a)), and the Company will become
a wholly owned Subsidiary of the Parent; and
WHEREAS, as an inducement to the Parent and the Merger Sub
to enter into this Agreement and consummate the transactions contemplated
hereby, concurrently with the execution of this Agreement, the Parent and the
Merger Sub are entering into one or more stockholder agreements with certain
stockholders of the Company listed on Schedule I hereto (collectively, the
"Company Stockholders") pursuant to which, among other things, each Company
Stockholder has agreed to vote the Company Common Stock then owned by such
Company Stockholder in favor of the Merger; and
WHEREAS, certain employees of the Company have entered into
Employment Agreements with the Parent and the Company concurrently with the
execution of this Agreement which are attached hereto as Schedule 6.3(e) to the
Company Disclosure Schedule (the "Employment Agreements"); and
WHEREAS, the Parent, the Merger Sub and the Company desire
to make certain representations, warranties and covenants in connection with the
transactions contemplated hereby and also to prescribe various conditions to the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
Article I
DEFINITIONS
1.1 Definitions. For all purposes in this Agreement, the
following terms shall have the respective meanings set forth in this Section 1.1
(such definitions to be equally applicable to both the singular and plural forms
of the terms herein defined):
"Acquisition Proposal" shall have the meaning set forth in
Section 5.3(a).
"Advisers Act" means the Investment Advisers Act of 1940,
as amended, and the rules and regulations promulgated thereunder by the SEC.
"Advisory Agreement" means, with respect to any Person,
each contract or agreement relating to its rendering of investment management or
investment advisory services, including any sub-advisory or similar agreement
and including, in the case of the Funds that are organized in any jurisdiction
within the United States, the organizational documents of such Funds.
"Affiliate", with respect to any Person, means a Person
that directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person.
"Agreement" shall have the meaning set forth in the
Preamble.
"Annuity Policy" shall have the meaning set forth in
Section 4.1(j)(xxi).
"Applicable Law" means any domestic or foreign federal,
state or local statute, law, ordinance, rule, administrative interpretation,
regulation, order, writ, injunction, directive, judgment, decree, policy,
guideline or other requirement (including those of any Governmental Authority
other than any law, regulation, administrative interpretation, order, directive
or judgment in relation to Taxes, whether United States or foreign), applicable
to any of the parties to this Agreement, any of each of their respective
Subsidiaries, or any of the Funds or any of the properties or assets of the
parties to this Agreement or any of their Subsidiaries or any of the Funds, as
the case may be.
"Base Date" means May 31, 2001.
"Base Revenue Run-Rate" means $19,608,973, which the Parent
and the Company have determined represents the Revenue Run-Rate as of the Base
Date, and has been calculated using the methodology set forth in Schedule II
hereto.
"Benefit Plans" means each employee or director benefit
plan, program, arrangement and contract (including any "employee benefit plan",
as defined in Section 3(3) of ERISA, and any bonus, deferred compensation, stock
bonus, stock purchase, restricted stock, stock option, employment, termination,
stay agreement or bonus, change in control and severance plan, program,
arrangement and contract) in effect on the date of this Agreement or disclosed
2
on Schedule 4.1(l)(iii) of the Company Disclosure Schedule, to which the Company
or any of its ERISA Affiliates is a party, which is maintained or contributed to
by the Company or any of its ERISA Affiliates, or with respect to which the
Company or any of its ERISA Affiliates could incur material liability under
Section 4069, 4201 or 4212(c) of ERISA which covers employees, directors or
former employees or directors of the Company and its Subsidiaries.
"Board of Directors" means the Board of Directors of any
specified Person and any committees thereof.
"Bonus Pool" shall have the meaning set forth in Section
5.10.
"Business Day" means any day on which banks are not
required or authorized to close in the City of New York.
"CEA" means the Commodity Exchange Act, as amended, and the
rules and regulations promulgated thereunder by the CFTC.
"Certificate" shall have the meaning set forth in Section
2.8(b).
"Certificate of Merger" shall have the meaning set forth in
Section 2.3.
"CFTC" means the Commodity Futures Trading Commission.
"Class A Common Stock" shall have the meaning set forth in
Section 4.1(c)(i)(A).
"Class B Common Stock" shall have the meaning set forth in
Section 4.1(c)(i)(B).
"Closing" shall have the meaning set forth in Section 2.2.
"Closing Date" shall have the meaning set forth in Section
2.2.
"Closing Revenue Run-Rate" means the Revenue Run-Rate as of
the most recent calendar month-end prior to the Effective Time in respect of
which a Monthly Run-Rate Schedule has been delivered pursuant to Section 5.12;
provided, that if the Parent exercises its right pursuant to Section 2.2 to
extend the date of the Closing to October 1, 2001, the Revenue Run-Rate as of
August 31, 2001 shall be utilized. The calculation of the Closing Revenue
Run-Rate shall be made using substantially the same methodology as used in the
calculation of the Base Revenue Run-Rate (as set forth on Schedule II hereto).
"Closing Tangible Net Worth" means the Tangible Net Worth
shown on the balance sheet of the Company as of the end of the most recent
calendar month-end prior to the Closing Date in respect of which a Monthly
Balance Sheet has been delivered pursuant to Section 5.13, calculated in a
manner consistent with the Target Tangible Net Worth.
"Code" means the Internal Revenue Code of 1986, as amended,
and any rules and Treasury regulations promulgated thereunder.
3
"Company" shall have the meaning set forth in the Preamble.
"Company Capital Stock" shall have the meaning set forth in
Section 4.1(c)(i)(C).
"Company Common Stock" shall have the meaning set forth in
Section 4.1(c)(i)(B).
"Company Contract" means any contract, agreement,
indenture, mortgage, deed of trust, note, bond, franchise, lease, plan, license
or other instrument, arrangement or other obligation, whether written or oral,
including all amendments, modifications, and supplements thereto and all side
letters affecting the obligations of any party thereunder, relating to the
ownership of or use by the Company or any of its Subsidiaries or the Funds of
any of their respective properties or assets or relating to the conduct of their
respective businesses, binding upon the Company, any of its Subsidiaries or the
Funds, other than Advisory Agreements.
"Company Disclosure Schedule" shall have the meaning set
forth in Section 4.1.
"Company Financial Advisor" means Xxxxxx Xxxxxx Securities,
Inc.
"Company Preferred Stock" shall have the meaning set forth
in Section 4.1(c)(i)(C).
"Company Stock Option Plan" means the Tremont 1998 Stock
Plan.
"Company Stock Options" shall have the meaning set forth in
Section 2.9.
"Company Stockholders" shall have the meaning set forth in
the recitals.
"Confidential Information" shall have the meaning set forth
in the Confidentiality Agreement.
"Confidentiality Agreement" shall have the meaning set
forth in Section 5.11(e).
"control" (including the terms "controlling", "controlled
by" and "under common control with") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
any Person, whether through the ownership of voting securities, by contract, or
otherwise.
"DGCL" shall mean the Delaware General Corporation Law.
"Dissenting Shares" shall have the meaning set forth in
Section 2.8(e).
"DOJ" means the Department of Justice.
"Effective Time" shall have the meaning set forth in
Section 2.3.
"Employee" shall have the meaning set forth in Section
4.1(l).
"Employment Agreements" shall have the meaning set forth in
the recitals.
4
"Encumbrance" means any lien, claim, mortgage, encumbrance,
pledge, security interest, or any other restriction with respect to
transferability or assignability.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" means any trade or business, whether or
not incorporated, that, together with the Company or any of its Subsidiaries
which is or has ever been treated as a "single employer" with any of them within
the meaning of section 4001(b) of ERISA or Sections 414(b), (c), (m) or (o) of
the Code.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder by the SEC.
"Exchange Agent" shall have the meaning set forth in
Section 3.1.
"Exchange Fund" shall have the meaning set forth in Section
3.1.
"Expenses" shall have the meaning set forth in Section
5.11(d).
"FSA" means the Financial Services Xxx 0000, and the rules
and regulations promulgated thereunder.
"FITX" means FITX Group Limited, an exempted Bermuda
company, and its Subsidiaries.
"Foreign Plan" shall have the meaning set forth in Section
4.1(l).
"Fund" means a vehicle for collective investment sponsored,
formed or controlled by the Company or any Subsidiary of the Company.
"GAAP" means generally accepted accounting principles in
the United States.
"Governmental Approvals" means all approvals, permits,
qualifications, authorizations, rights, licenses, franchises, consents, orders,
registrations or other approvals of or granted by any Governmental Authority,
whether United States or foreign, which are necessary or required under
Applicable Law in order to permit the Company, any Subsidiary of the Company or
any of the Funds to carry on their respective businesses or for the performance
by the Company of this Agreement and any of the agreements and transactions
contemplated hereby.
"Governmental Authority" means any United States or foreign
government, nation, state, territory, province, county, city or other unit or
subdivision thereof or any entity, authority, agency, department, board,
commission, instrumentality, court or other judicial body authorized on behalf
of any of the foregoing to exercise legislative, judicial, regulatory or
administrative functions of or pertaining to government, including any
Self-Regulatory Organization or other authority of any state or foreign
jurisdiction, and any court, tribunal or arbitrator(s) of competent
5
jurisdiction, and any governmental organization, agency or authority, in each
case whether United States or foreign.
"GBA" means the Xxxxx-Xxxxx-Xxxxxx Act.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"Immediate Family" means, with respect to any individual,
(a) such individual's spouse, parents, siblings and children, (b) any spouse,
parent, sibling or child of any Person specified in clause (a) above and (c) any
estate, trust, partnership or other entity or legal relationship of which a
majority of the equity interests at all times in question are, directly or
indirectly, held by or for the benefit of one or more of the Persons described
above and/or such individual.
"Indemnified Parties" shall have the meaning set forth in
Section 5.9(a).
"Index LLC" means Credit Suisse First Boston Tremont Index
LLC, a Delaware limited liability company.
"Insurance Policy" shall have the meaning set forth in
Section 4.1(j)(xx).
"Intellectual Property" means all domestic and foreign
copyrights, patents, proprietary models, processes, formulas and databases,
client lists, service marks, Software, know-how, trade names, trademarks and
trade secrets, and all registrations or applications for registration of any of
the foregoing.
"Investment Company" has the meaning set forth in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act
of 1940, as amended, and the rules and regulations promulgated thereunder by the
SEC.
"IRS" means the Internal Revenue Service.
"Key Client" shall have the meaning set forth in the letter
agreement, dated as of the date hereof, among the Parent, the Merger Sub and the
Company, relating to certain Advisory Agreements.
"Knowledge" when used with respect to the Company means the
actual knowledge of any executive officer of the Company or any of its
Subsidiaries after due inquiry, except as provided in the definition of
Subsidiary.
"Material Adverse Effect" means, with respect to any
Person, any effect that is material and adverse to the business, assets,
revenues, financial condition, results of operations, or assets under management
of such Person and its Subsidiaries, taken as a whole, or to the ability of such
Person to complete the Merger, other than to the extent resulting from declines
in U.S. or global securities markets or economic conditions in general, if the
6
effect on the Company and its Subsidiaries, taken as a whole without giving
effect to the Merger or the transactions contemplated by this Agreement, is not
either (A) particularized or unique to the Company and its Subsidiaries, taken
as a whole, or (B) disproportionate relative to the effect on the competitors of
the Company and its Subsidiaries (without taking into account the Merger or the
transactions contemplated by this Agreement); provided that a reduction in the
Revenue Run-Rate between the Base Date and the date as of which the Closing
Revenue Run-Rate is determined in and of itself shall not constitute a Material
Adverse Effect with respect to the Company.
"Material Contract" shall have the meaning set forth in
Section 4.1(o).
"Merger" shall have the meaning set forth in the Preamble.
"Merger Consideration" shall have the meaning set forth in
Section 2.8(a).
"Merger Sub" shall have the meaning set forth in the
Preamble.
"Monthly Run-Rate Schedule" shall have the meaning set
forth in Section 5.12.
"Monthly Tangible Net Worth Schedule" shall have the
meaning set forth in Section 5.13.
"NASD" means the National Association of Securities
Dealers, Inc. or any one or more of its Subsidiaries, as the context may
require, and any successor to any of them.
"NFA" means the National Futures Association.
"Notice" shall have the meaning set forth in Section 5.2.
"Number of Shares and Options Outstanding" means the sum of
the number of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares of Company Common Stock that are
100% owned or held directly or indirectly by the Parent or directly by the
Company and Dissenting Shares) plus the number of shares of Company Common Stock
issuable upon the exercise of all Company Stock Options outstanding immediately
prior to the Effective Time.
"Option Consideration" shall have the meaning set forth in
Section 2.9 (a).
"Parent" shall have the meaning set forth in the Preamble.
"Parent Disclosure Schedule" shall have the meaning set
forth in Section 4.2.
"Permitted Encumbrances" means all Encumbrances which are:
(1) Encumbrances set forth pursuant to Article IV on
the Company Disclosure Schedule or the Parent
Disclosure Schedule;
(2) statutory liens for Taxes or assessments that are
not yet due and payable or otherwise being contested
in good faith;
7
(3) matters which would be shown on an accurate
survey and any other defect or exception which would
be disclosed by a search of title, which in each case
does not materially impair the use, operation, value
or marketability of the asset to which it relates;
(4) liens of landlords and liens of carriers,
warehousemen, mechanics and materialmen and other
like liens arising in the ordinary course of business
for sums not yet due and payable; or
(5) other liens or imperfections in title on assets
which individually or in the aggregate do not exceed
$250,000 and do not materially detract from the value
of or materially impair the existing use of the
assets affected by such liens or imperfections.
"Person" means an individual, corporation, company, limited
liability company, partnership (limited or general), joint venture, association,
trust, unincorporated organization, other entity or group.
"Privacy Rules" shall have the meaning set forth in Section
4.1(w).
"Pro Forma Balance Sheet" means the projected pro forma
balance sheet of the Company as of August 31, 2001 attached hereto as Schedule
III.
"Proxy Statement" means the preliminary proxy materials
relating to the meeting of the Company stockholders, and any amendments or
supplements thereto.
"Regulatory Reports" shall have the meaning set forth in
Section 4.1(d).
"Representative" means any officer, director, employee,
representative, agent or Affiliate, including any investment banker, financial
advisor, attorney or accountant, which is employed or retained by the Parent or
the Company, as the case may be.
"Required Company Vote" shall have the meaning set forth in
Section 4.1(n).
"Retention Plan" shall have the meaning set forth in
Section 5.10.
"Revenue Run-Rate" means, as of any date, the aggregate
annualized investment advisory, investment management and subadvisory fees for
all investment advisory clients who pay fees based on assets under management
(excluding, in each case, any portion thereof attributable to investment
advisory clients that have notified the Company prior to the effective time of
their intention to terminate the services of the Company or any Subsidiary, and,
excluding in the case of the Closing Revenue Run-Rate, any portion thereof
attributable to investment advisory clients that have not consented prior to the
Closing (either expressly or by implication in accordance with Section 5.2
hereof) to the assignment or deemed assignment of their respective Advisory
Agreements resulting from the transactions contemplated by this Agreement or
that have withdrawn such consents prior to the Closing) by the Company or any
Subsidiary of the Company and payable to the Company or such Subsidiary.
8
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder by the SEC.
"Securities Act (Ontario)" means the Securities Act, R.S.O.
1990, as amended, and the rules and regulations promulgated thereunder by the
Ontario Securities Commission.
"Securities Laws" means the Securities Act, the Exchange
Act, the Investment Company Act, the Advisers Act, the CEA, the securities or
"blue sky" laws of any state or territory of the United States and the rules and
regulations of the NASD and the comparable laws, rules and regulations in effect
in any other country.
"Self-Regulatory Organization" means the NASD, the NFA, the
SFA, each national securities or commodities or futures exchange in the United
States and each other commission, board, agency or body, whether United States
or foreign, that is charged with the supervision or regulation of brokers,
dealers, securities underwriting or trading, stock exchanges, commodities or
futures exchanges, insurance companies or agents, investment companies,
investment advisers, commodity pool operators or commodity trading advisors.
"SFA" means the Securities Futures Authority.
"Software" means all computer programs, software,
databases, firmware and related documentation utilized by the referenced Person
or Persons in their or its business.
"Stockholders Agreement" means the Stockholders Agreement
dated as of the date hereof among the Parent, the Merger Sub and the Company
Stockholders.
"Subsidiary" means, with respect to any Person, any
controlled Affiliate of such Person, provided that a Fund shall be deemed not to
be a Subsidiary of the Company, and provided further that solely for purposes of
Article IV, the term Subsidiary with respect to the Company shall also be deemed
to include Index LLC, TII, TMRM and FITX and each of their Subsidiaries;
provided, however, that any representation or warranty made with respect to
Index LLC, TII, TMRM or FITX or any of their Subsidiaries or the Funds
controlled by such Persons in Article IV shall be made, unless otherwise stated,
to the actual Knowledge of the Company (without any requirement of due inquiry).
"Superior Proposal" shall have the meaning set forth in
Section 5.3(a).
"Surviving Corporation" shall have the meaning set forth in
Section 2.1.
"Tangible Net Worth" means the excess of (i) "stockholders
equity" over (ii) the sum of "goodwill net of amortization" and "investments in
joint ventures," as reflected on the Pro Forma Balance Sheet or the Monthly
Tangible Net Worth Schedule, as the case may be (it being understood that
9
Expenses, whether paid, accrued or accruable, shall be excluded from both the
Pro Forma Balance Sheet and the Monthly Tangible Net Worth Schedule).
"Target Tangible Net Worth" means $14,170,290, which is the
Tangible Net Worth shown on the Pro Forma Balance Sheet.
"Taxes" means all federal, provincial, territorial, state,
municipal, local, foreign or other taxes (including, without limitation,
governmental imposts, levies and other assessments) including, without
limitation, all income, franchise, gains, capital, profits, gift, real property,
goods and services, transfer, value added, gross receipts, windfall profits,
severance, ad valorem, personal property, production, sales, use, license,
stamp, documentary stamp, mortgage recording, excise, employment, payroll,
social security, unemployment, disability, estimated or withholding taxes,
customs and import duties, fees, assessments, and charges of any kind whatsoever
imposed by a Governmental Authority which is not a Self-Regulatory Organization,
together with any interest, additions, fines or penalties with respect thereto
or in respect of any failure to comply with any requirement regarding Tax
Returns and any interest in respect of such additions, fines or penalties and
shall include any liability in respect of Taxes as a transferee or as
indemnitor, guarantor, surety or in a similar capacity under any contract,
arrangement, agreement, understanding or commitment (whether oral or written).
"Taxing Authority" means any Governmental Authority having
jurisdiction over the assessment, determination, collection or other imposition
of Taxes.
"Tax Return" means any return, report, information
statement, schedule or other document (including, without limitation, any such
document prepared on a consolidated, combined or unitary basis and also
including any supporting schedules or attachments thereto) filed or required to
be filed with respect to Taxes.
"Technology Systems" means the electronic data processing,
information, record-keeping, communications, telecommunications, portfolio
trading and computer systems (including Software) which are used by the Company,
its Subsidiaries and the Funds, as applicable, in their respective businesses.
"Termination Date" shall have the meaning set forth in
Section 7.1(b).
"Termination Fee" shall have the meaning set forth in
Section 7.3(a).
"TFI" shall have the meaning set forth in Section
4.1(i)(xi). "TII" means Tremont International Insurance, Ltd., a Cayman Islands
exempted limited company, and its Subsidiaries.
"TMRM" means Tremont MRM Services Limited, an exempted
Bermuda company, and its Subsidiaries.
"TPI" shall have the meaning set forth in Section
4.1(i)(v).
10
"TSI" shall have the meaning set forth in Section
4.1(i)(viii).
"TTEL" shall have the meaning set forth in Section
4.1(i)(xiv)
"WARN" shall have the meaning set forth in Section 4.1(l).
Article II
THE MERGER
2.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with DGCL, the Merger
Sub shall be merged with and into the Company on the Closing Date. Following the
Merger, the separate corporate existence of the Merger Sub shall cease and the
Company shall continue as the surviving corporation (the "Surviving
Corporation").
2.2 Closing. The closing of the Merger (the "Closing") will
take place at the offices of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, unless another place is agreed to in writing by the Parent
and the Company. The Closing will take place at 10:00 a.m., New York City time,
as soon as practicable, but in any event not later than the fifth Business Day,
after the satisfaction or waiver (subject to any Applicable Law) of the
conditions (excluding conditions that, by their terms, cannot be satisfied until
the Closing Date) set forth in Article VI (the "Closing Date") unless another
time or date is agreed to in writing by the Parent and the Company; provided,
however, that if in accordance with the foregoing the Closing would occur prior
to October 1, 2001, the Parent may extend the date of the Closing until October
1, 2001 by written notice given to the Company prior to the fifth Business Day
referred to above. The Closing will be deemed to have occurred at the opening of
business on the Closing Date.
2.3 Effective Time. On the Closing Date, the parties shall
(a) file a certificate of merger (the "Certificate of Merger") in such form as
is required by and executed in accordance with the relevant provisions of the
DGCL and (b) make all other filings or recordings required under the DGCL. The
Merger shall become effective at such time as the Certificate of Merger is duly
filed with the Office of the Secretary of State of the State of Delaware or at
such subsequent time as the Parent and the Company shall agree and be specified
in the Certificate of Merger (the date and time the Merger becomes effective
being the "Effective Time").
2.4 Effects of the Merger. At and after the Effective Time,
the Merger will have the effects set forth in the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all of
the property, rights, privileges, powers and franchises of the Company and the
Merger Sub shall be vested in the Surviving Corporation, and all debts,
liabilities and duties of the Company and the Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
2.5 Certificate of Incorporation. At the Effective Time,
the Certificate of Incorporation of the Merger Sub as in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
11
Surviving Corporation; provided, however, that Article FIRST of the Certificate
of Incorporation of the Surviving Corporation shall be amended to read in its
entirety as follows: "FIRST: The name of the corporation is "Tremont Advisers,
Inc." and as so amended shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by the DGCL and such
Certificate of Incorporation.
2.6 By-Laws. At the Effective Time, the by-laws of the
Merger Sub as in effect immediately prior to the Effective Time shall be the
by-laws of the Surviving Corporation until thereafter changed or amended as
provided by the DGCL, the Certificate of Incorporation of the Surviving
Corporation and such by-laws.
2.7 Officers and Directors of Surviving Corporation. The
officers of the Company as of the Effective Time shall be the officers of the
Surviving Corporation, until the earlier of their resignation or removal or
otherwise ceasing to be an officer or until their respective successors are duly
elected and qualified, as the case may be. The directors of the Merger Sub as of
the Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or otherwise ceasing to be a director or
until their respective successors are duly elected and qualified.
2.8 Effect on Capital Stock; Merger Consideration.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof, each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares of Company Common Stock that are 100% owned or held directly
or indirectly by the Parent or the Company, which shall be canceled as provided
in Section 2.8(c), and Dissenting Shares) shall be converted into the right to
receive, subject to the provisions of Article II, without interest, an amount in
cash equal to $19.00 (such amount, as it may be adjusted in accordance with this
Section 2.8(a), the "Merger Consideration"); provided, however, that (i) if
Target Tangible Net Worth exceeds Closing Tangible Net Worth by an amount
greater than $1 million, the Merger Consideration shall be decreased by an
amount equal to the quotient obtained by dividing (A) the amount of such excess
above $1 million by (B) the Number of Shares and Options Outstanding and (ii) if
the Closing Tangible Net Worth exceeds Target Tangible Net Worth by an amount
greater than $1 million, the Merger Consideration shall be increased by an
amount equal to the quotient obtained by dividing (A) the amount of such excess
above $ 1 million by (B) the Number of Shares and Options Outstanding.
(b) As a result of the Merger and without any action on the
part of the holders thereof, at the Effective Time, all shares of Company Common
Stock shall cease to be outstanding and shall be canceled and shall cease to
exist, and each holder of a certificate which immediately prior to the Effective
Time represented any such shares of Company Common Stock (each, a "Certificate")
shall thereafter cease to have any rights with respect to such shares of Company
Common Stock, except the right to receive the applicable Merger Consideration,
other than with respect to Company Common Stock to be canceled in accordance
12
with Section 2.8(c) and Dissenting Shares, in accordance with Article II upon
the surrender of such Certificate.
(c) Each share of Company Common Stock issued that is 100%
owned or held directly or indirectly by the Parent or the Company at the
Effective Time shall, by virtue of the Merger, cease to be outstanding and shall
be canceled and no payment or other consideration shall be delivered in exchange
therefor.
(d) Each share of common stock, par value $0.01 per share,
of the Merger Sub issued and outstanding immediately prior to the Effective
Time, shall be converted into a number of shares of common stock, par value
$0.01 per share, of the Surviving Corporation equal to (i) the Number of Shares
and Options Outstanding divided by the number of shares of Merger Sub common
stock issued and outstanding immediately prior to the Effective Time, or (ii)
such lesser number of shares as the Parent shall determine prior to the
Effective Time.
(e) Notwithstanding any other provision of this Agreement,
shares of Company Common Stock issued and outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger and
who demands appraisal for such shares in accordance with Section 262 of the DGCL
("Dissenting Shares") shall not be converted into a right to receive the Merger
Consideration unless such holder fails to perfect within the period prescribed
by the DGCL or withdraws or otherwise loses such holder's right to appraisal
under the DGCL. If, after the Effective Time, such holder fails to perfect or
withdraws or loses such holder's right to appraisal, such Dissenting Shares
shall be treated as if they had been converted as of the Effective Time into the
right to receive the Merger Consideration, without interest or dividends
thereon. The Company shall give the Parent (i) prompt notice of any written
demands received by the Company for appraisal of shares of Company Common Stock,
attempted withdrawals of such demands, and other instruments served pursuant to
the DGCL and received by the Company and relating thereto and (ii) the
opportunity to direct all negotiations and proceedings with respect to such
demands for appraisals. Prior to the Effective Time, the Company shall not,
except with the prior written consent of the Merger Sub, make any payment with
respect to, or settle or offer to settle, any such demands.
2.9 Stock Options.
(a) Each option held by any Person to acquire shares of
Company Capital Stock ("Company Stock Option") that is outstanding immediately
prior to the Effective Time, whether or not then vested or exercisable, shall,
effective as of the Effective Time, be cancelled in exchange for a single lump
sum cash payment, to be paid by the Surviving Corporation as soon as practicable
following the Closing upon its receipt of a release or other documentation by
such Person reasonably satisfactory to the Parent and the Surviving Corporation,
equal to the product of (i) the number of shares of Company Common Stock subject
to such Company Option and (ii) the excess, if any, of the Merger Consideration
for a share of Company Common Stock at the Effective Time over the exercise
13
price per share of such Company Stock Option (the aggregate amount payable under
this Section 2.9, the "Option Consideration").
(b) Prior to the Effective Time, the Company shall (i) use
its reasonable best efforts to obtain any consents from holders of Company Stock
Options and (ii) amend, in a manner reasonably acceptable to the Parent, the
terms of its equity incentive plans or arrangements or any other agreements
entered into thereunder, in each case as is necessary to give effect to the
provisions of paragraph (a) of this Section 2.9.
(c) Except as otherwise agreed to by the parties, prior to
the Effective Time, (i) the Company shall cause the Company Stock Option Plan to
be terminated as of the Effective Time and the provisions in any other plan,
program or arrangement providing for the issuance or grant of any other interest
in respect of Company Capital Stock or any equity securities in any of the
Subsidiaries to be deleted as of the Effective Time, and (ii) the Company shall
take all action necessary to ensure that the payments or conversions into the
right to receive cash set forth in Section 2.9(a) extinguish all rights of
participants under the Company Stock Option Plan and such plans, programs and
arrangements to receive equity securities of the Company or any of its
Subsidiaries and that following the Effective Time no such participant shall
have any right thereunder to acquire equity securities of the Company, the
Surviving Corporation, the Parent or any of their respective Subsidiaries.
2.10 Further Assurances. At and after the Effective Time,
the officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or the Merger Sub,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of the Company or the Merger Sub, any other actions and
things to vest, perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and under any of the
rights, properties or assets acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
Article III
EXCHANGE OF CERTIFICATES
3.1 Exchange Fund. Prior to the Effective Time, the Parent
shall designate a commercial bank or trust company selected by the Parent and
reasonably acceptable to the Company to act as exchange agent hereunder for the
purpose of exchanging Certificates for the Merger Consideration (the "Exchange
Agent"). At or prior to the Effective Time, the Parent shall deposit or cause to
be deposited with the Exchange Agent, in trust for the benefit of holders of
shares of Company Common Stock, the aggregate amount of cash to be paid pursuant
to Section 2.8 in exchange for outstanding shares of Company Common Stock (other
than shares of Company Common Stock that are 100% owned or held directly or
indirectly by the Parent or the Company which shall be canceled as provided in
Section 2.8(c) and Dissenting Shares). Any cash deposited with the Exchange
Agent shall hereinafter be referred to as the "Exchange Fund".
14
3.2 Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Surviving Corporation shall cause the Exchange
Agent to mail (or, in the case of any holder that appears at the applicable
office of the Exchange Agent and so requests, to provide) to each holder of a
Certificate (a) a letter of transmittal which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent, and which letter shall
be in customary form and have such other provisions as the Parent may reasonably
specify and (b) instructions for effecting the surrender of such Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate to the
Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other documents
as may reasonably be required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor a check (or, in
the case of any holder that so requests, provides wire transfer instructions and
offers to pay any reasonable cost of a wire transfer of immediately available
funds) in the aggregate amount equal to the Merger Consideration multiplied by
the number of shares of Company Common Stock formerly represented by such
Certificate less any required withholding of Taxes as provided in Section 3.8.
No interest will be paid or will accrue on any cash payable pursuant to the
preceding sentence. In the event of a transfer of ownership of Company Common
Stock which is not registered in the transfer records of the Company, a check in
the proper amount of cash for the appropriate Merger Consideration may be paid
with respect to such Company Common Stock to such a transferee if the
Certificate formerly representing such shares of Company Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer Taxes have been paid or are not payable. The Exchange Fund shall not be
used for any purpose other than as set forth in this Article III.
3.3 No Further Ownership Rights in Company Common Stock.
Cash paid upon conversion of shares of Company Common Stock in accordance with
the terms of Article II and this Article III shall be deemed to have been paid
in full satisfaction of all rights pertaining to the shares of Company Common
Stock.
3.4 Termination of Exchange Fund. Any portion of the
Exchange Fund that remains undistributed to the holders of Certificates for six
months after the Effective Time shall be delivered to the Surviving Corporation
or otherwise on the instruction of the Surviving Corporation, and any holders of
the Certificates who have not theretofore complied with this Article III shall
thereafter look only to the Surviving Corporation for the Merger Consideration
with respect to the shares of Company Common Stock formerly represented thereby
to which such holders are entitled pursuant to Section 2.8 and Section 3.2.
3.5 No Liability. None of the Parent, the Merger Sub, the
Company, the Surviving Corporation or the Exchange Agent shall be liable to any
Person in respect of any Merger Consideration from the Exchange Fund delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar Applicable Law.
15
3.6 Investment of the Exchange Fund. The Exchange Agent
shall invest any cash included in the Exchange Fund only in one or more of the
following investments as directed by the Surviving Corporation from time to
time: (a) obligations of the United States government maturing not more than 180
days after the date of purchase; (b) certificates of deposit maturing not more
than 180 days after the date of purchase issued by a bank organized under the
Applicable Laws of the United States or any state thereof having a combined
capital and surplus of at least $500,000,000; (c) a money market mutual fund,
which may be managed by an Affiliate of the Parent, having assets of at least
$1,000,000,000; or (d) tax-exempt or corporate debt obligations maturing not
more than 180 days after the date of purchase given the highest investment grade
rating by Standard & Poor's and Xxxxx'x Investor Service. Any interest and other
income resulting from such investments shall promptly be paid to the Surviving
Corporation.
3.7 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond in
such form and amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will deliver in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration with respect to the shares of
Company Common Stock formerly represented thereby and unpaid dividends, if any,
on shares of Company Common Stock deliverable in respect thereof, pursuant to
this Agreement.
3.8 Withholding Rights. The Surviving Corporation and the
Parent or the Exchange Agent acting pursuant to this Section 3.8 shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock or
Company Stock Options, as the case may be, such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code,
or any provision of state, local or foreign tax law. To the extent that amounts
are so withheld by the Surviving Corporation or the Parent, as the case may be,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common Stock or Company
Stock Options, as the case may be, in respect of which such deduction and
withholding was made by the Surviving Corporation or the Parent, as the case may
be.
3.9 Stock Transfer Books. At the close of business, New
York City time, on the day Effective Time occurs, the stock transfer books of
the Company shall be closed and there shall be no further registration of
transfers of shares of Company Common Stock thereafter on the records of the
Company. From and after the Effective Time, the holders of Certificates shall
cease to have any rights with respect to such shares of Company Common Stock
formerly represented thereby, except as otherwise provided herein or by
Applicable Law. At or after the Effective Time, any Certificates presented to
the Exchange Agent or the Parent for any reason shall be exchanged for the
Merger Consideration with respect to the shares of Company Common Stock formerly
represented thereby.
16
Article IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. Except
as set forth in writing in the disclosure schedule delivered by the Company to
the Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule") (each section of which qualifies the correspondingly numbered
representation and warranty or covenant to the extent specified therein), the
Company represents and warrants to the Parent and Merger Sub as follows:
(a) Organization, Standing and Power. The Company, each of
its Subsidiaries and each of the Funds has been duly organized or formed as a
corporation, limited partnership, limited liability company, trust or other
entity, as the case may be, and is validly existing and, if applicable, in good
standing under the Applicable Laws of its jurisdiction of organization, has all
the corporate or other power and authority to own, lease and operate its
properties and assets and to carry on its business as now and currently planned
to be conducted, and is duly qualified and, if applicable, in good standing to
do business in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such licensing,
qualification or, if applicable, good standing necessary other than in such
jurisdictions where the failure to be so licensed or qualified, if applicable,
or in good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect with respect to the Company. Copies
of the charter and by-laws or comparable organizational documents and any
amendments thereto of the Company, each of its Subsidiaries and each of the
Funds were previously furnished to the Parent and are true, complete and correct
copies of such documents as in effect on the date of this Agreement. Schedule
4.1(a) of the Company Disclosure Schedule sets forth a complete and accurate
list of each direct and indirect Subsidiary of the Company including each
Subsidiary's name, jurisdiction of incorporation and authorized and outstanding
ownership interests, including the record and beneficial owners thereof, and the
jurisdictions in which each of them is licensed or qualified or, if applicable,
in good standing to do business.
(b) Authority of the Company; Execution and Delivery. The
Company has the corporate power and authority to enter into and carry out its
obligations under this Agreement, subject in the case of the consummation of the
Merger to the adoption of this Agreement by the Required Company Vote. The
execution and delivery by the Company of this Agreement and the performance by
the Company of the transactions contemplated hereby have been duly and validly
authorized and approved by all necessary corporate action on the part of the
Company, and no other corporate or stockholder proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby other than, in the case of the consummation of
the Merger, to the adoption of this Agreement by the Required Company Vote and
thereby. The Company has duly executed and delivered this Agreement. Assuming
the due authorization, execution and delivery of this Agreement by the Parent
and the Merger Sub, this Agreement constitutes and, assuming the due
authorization, execution and delivery thereof by each other party thereto, all
instruments of conveyance and other documents executed and delivered or to be
17
executed and delivered by the Company, as contemplated by this Agreement,
constitute, or when so executed and delivered will constitute, the legal, valid
and binding agreements, instruments and obligations of the Company, enforceable
against the Company in accordance with their respective terms except as such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
transfer, moratorium, reorganization and similar Applicable Laws of general
application relating to or affecting the rights and remedies of creditors and by
the application of general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law).
(c) Capital Structure.
(i) The authorized capital stock of the Company consists of
(A) 5,000,000 shares of Class A Common Stock, par value $0.01
per share (the "Class A Common Stock"), (B) 20,000,000 shares
of Class B Common Stock, par value $0.01 per share (the "Class
B Common Stock," and, together with the Class A Common Stock,
the "Company Common Stock") and (C) 1,000,000 shares of
Preferred Stock, par value $1.00 (the "Company Preferred
Stock" and, together with the Company Common Stock, the
"Company Capital Stock"). As of the date of this Agreement,
(A) 1,730,430 shares of Class A Common Stock are issued and
outstanding, (B) 5,254,258 shares of Class B Common Stock are
issued and outstanding, (C) no shares of Company Preferred
Stock are issued and outstanding, (D) 250,000 shares of Class
A Common Stock, 27,250 shares of Class B Common Stock and no
shares of Company Preferred Stock are issued and held in the
treasury of the Company and (E) no shares of Class A Common
Stock, 1,050,194 shares of Class B Common Stock and no shares
of Company Preferred Stock are reserved for issuance upon the
exercise of Company Stock Options or otherwise. All issued and
outstanding shares of Company Capital Stock are, and all
shares of Company Capital Stock which may be issued pursuant
to the exercise of outstanding Company Stock Options, when
issued in accordance with the terms thereof will be, duly
authorized, validly issued, fully paid and nonassessable. None
of the issued and outstanding shares of Company Capital Stock
is entitled to any preemptive or anti-dilution rights, by
agreement or otherwise. Schedule 4.1(c)(i) of the Company
Disclosure Schedule sets forth a complete list of each Company
Stock Option outstanding as of the date of this Agreement,
including the name of the optionee, class of Company Capital
Stock, number of shares, exercise price, date of grant,
vesting schedule and whether the consent of the optionee is
required to give effect to the provisions of Section 2.9(a).
Except as set forth on Schedule 4.1(c)(i) of the Company
Disclosure Schedule, there are outstanding as of the date of
this Agreement no options, warrants, calls, rights,
commitments, agreements, arrangements, undertakings of any
kind or other rights to acquire capital stock from the Company
(whether or not such options, warrants or other rights are
"in-the-money" and whether or not exercisable).
(ii) As of the date of this Agreement, no bonds, debentures,
notes or other indebtedness of the Company or any of its
18
Subsidiaries having the right to vote on any matters on which
stockholders may vote are issued or outstanding.
(iii) There are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings
of any kind obligating the Company or any of its Subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or
sold, or reserve for issuance, delivery or sale, additional
shares of capital stock or other ownership interests of the
Company or any of its Subsidiaries or, securities convertible
into or exchangeable for shares of capital stock or other
ownership interests of the Company or any of its Subsidiaries,
or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or
undertaking. There are no outstanding obligations of the
Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any ownership interests of the Company or
any of its Subsidiaries or to provide funds or contribute
capital to, or make any investment in, any other Person, other
than a direct wholly owned Subsidiary of the Company.
(iv) All of the outstanding equity interests of each
Subsidiary of the Company are duly authorized, validly issued,
fully paid and nonassessable and are owned, beneficially and
of record, by the Company or a Subsidiary which is wholly
owned, directly or indirectly, by the Company, free and clear
of any Encumbrances. Other than the Subsidiaries of the
Company and the Funds, the Company does not directly or
indirectly beneficially own any securities or other ownership
interests in any other entity. Schedule 4.1(c)(iv) of the
Company Disclosure Schedule sets forth, with respect to each
of Index LLC, TII, TMRM and FITX, without qualification as to
the Knowledge of the Company, the ownership interests in such
entities held by the Company, its Subsidiaries and any of
their respective officers, directors and employees and, to the
Knowledge of the Company, the other equity owners thereof.
(v) There are no voting trusts or other agreements or
understandings to which the Company or any Subsidiary of the
Company is a party with respect to the voting, ownership or
transfer of the ownership interests of the Company or any
Subsidiary of the Company. None of the issued and outstanding
ownership interests of any Subsidiary is entitled to any
preemptive or anti-dilution rights, by agreement or otherwise.
(vi) No indebtedness of the Company or any Subsidiary of the
Company contains any restriction upon (A) the prepayment of
any indebtedness of the Company or any Subsidiary of the
Company, (B) the incurrence of indebtedness by the Company or
any Subsidiary of the Company or (C) the ability of the
Company or any Subsidiary of the Company to grant any
Encumbrance on the properties or assets of the Company or any
Subsidiary of the Company.
19
(d) Reports and Financial Statements. The Company, each of
its Subsidiaries and each of the Funds have timely filed (i) all reports,
schedules, forms, statements and other documents (other than Tax Returns),
together with any amendments made with respect thereof (collectively,
"Reports"), required to be filed by them with the SEC and (ii) all material
Reports required to be filed by them with any other Governmental Authority since
January 1, 1998 (the items described in clauses (i) and (ii), collectively,
including all exhibits thereto, the "Regulatory Reports") and have paid all fees
and assessments due and payable in connection therewith. No Subsidiary of the
Company is required to file any report, schedule, form, statement or other
document with the SEC. None of the reports, schedules, forms, statements and
other documents filed by the Company, any of its Subsidiaries or Funds with any
Governmental Authority since January 1, 1998, as of their respective dates (and,
if amended or superseded by a filing prior to the date of this Agreement, then
on the date of such filing), contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Each of the audited consolidated financial statements
and unaudited interim financial statements (including the related notes)
included in the Regulatory Reports filed with any Self-Regulatory Organization
complied as to form, as of its respective date of filing with such
Self-Regulatory Organization, in all material respects with applicable
accounting requirements and the published rules and regulations of the Self
Regulatory Organization with respect thereto, have been prepared in accordance
with GAAP (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and present fairly, in all
material respects, the consolidated financial position and consolidated results
of operations and cash flows of the Company and each Subsidiary of the Company
as of the respective dates or for the respective periods set forth therein, all
in conformity with GAAP consistently applied during the periods involved except
as otherwise noted therein, and subject, in the case of the unaudited interim
financial statements, to normal and recurring year-end adjustments that are not
material. All of such Regulatory Reports, as of their respective dates (and as
of the date of any amendment to the respective Regulatory Report prior to the
date of this Agreement), complied in all material respects with the applicable
requirements of Applicable Law.
(e) Absence of Liabilities. Except for liabilities or
obligations which are accrued or reserved against in the Company's most recent
financial statements (or in the related notes thereto) included in the
Regulatory Reports publicly disclosed and filed with the SEC or which were
incurred in the usual, regular and ordinary course of business and consistent
with past practices since the date of the Company's most recent financial
statements included in the Regulatory Reports publicly disclosed and filed with
the SEC, the Company and each of its Subsidiaries do not have any material
liabilities or obligations (whether absolute, accrued, contingent or otherwise).
(f) Absence of Certain Changes or Events. Except as
publicly disclosed in the Regulatory Reports filed with the SEC prior to the
date hereof and copies of which have been provided or made available by the
Company to the Parent, since December 31, 2000 the businesses of the Company,
its Subsidiaries and Funds have been conducted in the ordinary course,
20
consistent with past practices and there has not been any event, occurrence,
development or state of circumstances or facts that has had, or would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to the Company and there has not been (i) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, ownership interests or property) with respect to any of the
Company's or its Subsidiaries' ownership interests, (ii) any split, combination
or reclassification of any of the Company's or any of its Subsidiaries'
ownership interests or any redemption or other acquisition by the Company or any
of its Subsidiaries of any shares of its ownership interests or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for ownership interests of the Company or any Subsidiary
(iii) (A) any granting by the Company or any of its Subsidiaries to any
director, officer or employee of the Company of any increase in compensation,
bonus or other benefits, except for normal increases in the usual, regular and
ordinary course of business or in connection with the hiring or promotion of any
such person or increases required under any employment agreements in effect as
of the date of the most recent audited financial statements included in the
Regulatory Reports filed and publicly available prior to the date of this
Agreement, (B) any granting by the Company or any of its Subsidiaries to any
such director, officer or employee of any increase in severance or termination
pay, except in the usual, regular and ordinary course of business or in
connection with the hiring or promotion of any such person or (C) any entry by
the Company or any of its Subsidiaries into, or any amendment of, any
employment, deferred compensation, consulting, severance, termination or
indemnification agreement with any such director, officer or employee, other
than in the ordinary course of business or in connection with the hiring or
promotion of any such person, (iv) except insofar as may be required by a change
in GAAP, any change in accounting methods, principles or practices by the
Company, (v) any Tax election that individually or in the aggregate would
reasonably be expected to have a material effect on the Company or any of its
Tax attributes or any settlement or compromise of any material Tax liability,
(vi) any amendment to any term of any outstanding security of the Company or any
of its Subsidiaries, (vii) any entry into any agreement, commitment or
transaction by the Company or any of its Subsidiaries which is material to the
Company and its Subsidiaries taken as a whole, except for agreements,
commitments or transactions entered into in the usual, regular and ordinary
course of business or (vii) any agreement or approval to do any of the
foregoing.
(g) Consents; No Conflict.
(i) Other than filings and/or notices (A) pursuant to Section
2.3, (B) under the HSR Act or the Securities Laws, (C)
required under a foreign antitrust or trade regulation law or
(D) required to be made with any applicable Self-Regulatory
Organization, neither the Company nor any Subsidiaries of the
Company nor any Fund is required to obtain the consent,
authorization or approval of, or submit any notice, report or
any other filing with, any Governmental Authority or any third
party or to obtain any consent, permit, license or franchise
in connection with the execution, delivery and performance of
21
this Agreement, except, in the case of any third party, as
would not reasonably be expected to have a Material Adverse
Effect with respect to the Company.
(ii) The execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions
contemplated hereby will not constitute or result in any
change in the rights or obligations of any party under any
Company Contract, and will not conflict with, result in the
termination of, contravene or constitute a default under, or
be an event which, with the giving of notice or passage of
time or both will become a default under, or give to any other
Person any right of termination, amendment, cancellation,
acceleration or receipt of payment pursuant to any of the
terms, conditions or provisions of or under (A) any Applicable
Law (provided, as to consummation of the transactions
contemplated hereby or thereby, the filings, reports and
notices are made, and approvals are obtained, as referred to
in Section 4.1(g)(i)), (B) the charter and by-laws or
comparable organizational documents of the Company, any
Subsidiary of the Company or any of the Funds or (C) any
Company Contract, except in the case of clause (A) or (C) as,
individually and in the aggregate, would not reasonably be
expected to have a Material Adverse Effect with respect to the
Company. Schedule 4.1(g) of the Company Disclosure Schedule
sets forth a correct and complete list of all Company
Contracts pursuant to which consents or waivers (whether as
result of a change of control, default, right of termination
or acceleration or other such comparable provision) are
required prior to or in connection with the consummation of
the transactions contemplated by this Agreement (whether or
not subject to the exception set forth with respect to clause
(C) above).
(h) Assets.
(i) None of the Company, any Subsidiary of the Company or any
Fund owns or has owned any real property. Each leasehold
interest of the Company, any Subsidiary of the Company or any
Fund in any real property is described on Section 4.1(h)(i) of
the Company Disclosure Schedule.
(ii) The Company, each Subsidiary of the Company and each Fund
owns, or otherwise has sufficient and legally enforceable
rights to, free and clear of all Encumbrances other than
Permitted Encumbrances, all of the properties and assets
(real, personal or mixed, tangible or intangible) necessary to
operate its businesses as currently operated.
(i) Compliance.
(i) Except as set forth in the Regulatory Reports publicly
disclosed and filed with the SEC prior to the date hereof, all
material Governmental Approvals have been obtained and are in
full force and effect. There has been no violation,
cancellation, suspension, revocation of or default under any
Governmental Approval or receipt by the Company nor any
Subsidiary of the Company nor any of the Funds of any notice
of any violation, cancellation, suspension, revocation,
non-renewal, default or dispute affecting any Governmental
22
Approval, and no basis exists for any such action, including,
without limitation, as a result of the consummation of the
transactions contemplated by this Agreement other than
violations, cancellations, suspensions, revocations or
defaults that individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect with
respect to the Company. The Company, each Subsidiary of the
Company and each of the Funds has complied, and is currently
in compliance, with Applicable Law applicable to their
respective businesses, except where the failure to comply
individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect with respect to the
Company, and neither the Company nor any Subsidiary of the
Company nor any of the Funds has received any notice alleging
any failure to so comply.
(ii) Since January 1, 1998, the Company has not received any
notice that any Governmental Authority has initiated any
administrative proceeding or investigation into the business
or operations of the Company, any of its Subsidiaries or any
of the Funds or any principal employees of any of them. There
is no unresolved violation or exception by any Governmental
Authority with respect to any report or statement by any
Governmental Authority relating to any examination of the
Company, any of its Subsidiaries or any of the Funds.
(iii) None of the Company or any of its Subsidiaries is
ineligible pursuant to Section 203 of the Advisers Act or
Section 15(b) of the Exchange Act to serve as a registered
investment adviser or broker-dealer and no "Associated Person"
(as defined in the Advisers Act or the Exchange Act) of the
Company, any of its Subsidiaries or any of the Funds is
ineligible pursuant to Section 203 of the Advisers Act or
Section 15(b) of the Exchange Act to serve as an Associated
Person of a registered investment adviser or broker-dealer.
(iv) None of the Company, any of its Subsidiaries, any of the
Funds is registered as, or is required to be registered as, an
Investment Company. No other Person to whom the Company or any
of its Subsidiaries renders investment management or
investment advisory services is registered as an Investment
Company.
(v) Except for Tremont Partners, Inc. ("TPI"), neither the
Company nor any Affiliate of the Company has been during the
past five years an "investment adviser" required to be
registered, licensed or qualified as an investment adviser
under the Advisers Act or other Applicable Law or subject to
any material liability or disability by reason of any failure
to be so registered, licensed or qualified, except for any
such failure to be so registered, licensed or qualified that
would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect with respect to the
Company.
(vi) TPI is, and at all times required by the Advisers Act
during the past five years has been, duly registered as an
investment adviser under the Advisers Act. TPI is, and at all
times required by Applicable Law (other than the Advisers Act)
23
during the past five years has been, duly registered, licensed
or qualified as an investment adviser in each state or any
other domestic or foreign jurisdiction where the conduct of
its business required such registration, licensing or
qualification, except for any such failure to be so
registered, licensed or qualified that, individually or in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect with respect to the Company.
(vii) Each Form ADV filed (or deemed to be filed) by TPI,
including any amendments thereto filed (or deemed to be filed)
with the SEC, complied in all material respects with the
Advisers Act and was complete and correct in all material
respects and omitted no material facts required to be stated
therein.
(viii) Except for Tremont Securities, Inc. ("TSI"), neither
the Company nor any Affiliate of the Company has been during
the past five years a "broker-dealer" required to be
registered, licensed or qualified as a broker-dealer under the
Exchange Act or other Applicable Law or subject to any
material liability or disability by reason of any failure to
be so registered, licensed or qualified, except for any such
failure to be so registered, licensed or qualified that would
not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect with respect to the Company.
(ix) TSI is, and at all times required by the Exchange Act
during the past five years has been, duly registered as a
broker-dealer under the Exchange Act. TSI is, and at all times
required by Applicable Law (other than the Exchange Act)
during the past five years has been, duly registered, licensed
or qualified as a broker-dealer in each state or any other
domestic or foreign jurisdiction where the conduct of its
business required such registration, licensing or
qualification, except for any such failure to be so
registered, licensed or qualified that, individually or in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect with respect to the Company.
(x) Each Form BD filed by TSI, including any amendments
thereto filed with the SEC or the NASD, complied in all
material respects with the Exchange Act and was complete and
correct in all material respects and omitted no material facts
required to be stated therein.
(xi) Except for Tremont Futures, Inc. ("TFI"), neither the
Company nor any Affiliate of the Company has been during the
past five years a "commodity pool operator" or "commodity
trading advisor" required to be registered, licensed or
qualified as such under the CEA or other Applicable Law or to
be a member of the NFA or subject to any material liability or
disability by reason of any failure to be so registered,
licensed or qualified, except for any such failure to be so
registered, licensed or qualified that would not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to the Company.
24
(xii) TFI is, and at all times required by the CEA during the
past five years has been, duly registered as a commodity pool
operator and commodity trading advisor under the CEA and is a
member in good standing of the NFA, and has, to the extent
required by the NFA Bylaw 1101, ensured that: (A) the sponsors
of, advisors to, or other appropriate Persons with respect to,
any collective investment vehicle in which any of the Funds
has invested (or in which any Person with respect to which TFI
has acted as a commodity trading advisor under the CEA has
invested) has been, to the extent required under the CEA, duly
registered as a commodity pool operator or commodity trading
adviser under the CEA and is a member in good standing of the
NFA; and (B) any futures commission merchants, introducing
brokers, floor brokers or floor traders with which TFI, any of
the Funds, or any Person with respect to which TFI has acted
as a commodity trading advisor under the CEA, has done
business has been, to the extent required under the CEA, duly
registered in its appropriate capacity under the CEA and is a
member in good standing of the NFA.
(xiii) Each Form 7-R and, to the Knowledge of the Company,
each Form 8-R filed by TFI, or by any "principal" or
"Associated Person" (as such terms are defined in the CEA or
the rules of the NFA) thereof, including any amendments
thereto filed with the CFTC or NFA, complied in all material
respects with the CEA and was complete and correct in all
material respects and omitted no material facts required to be
stated therein; and TFI and, to the Knowledge of the Company,
each such principal or Associated Person thereof has filed any
such forms 7-R or 8-R required to be filed under the CEA or
rules of the NFA. Except as set forth in Schedule 4.1(i)
(xiii) of the Company Disclosure Schedule, (A) no form 7-R or
form 8-R to which the immediately preceding sentence refers,
including any amendments thereto, has contained a "Yes"
response by the applicable registrant, or Person to be listed
as a principal or Associated Person of a registrant to any
item under the "Disciplinary History" section of such Form 7-R
or Form 8-R. Each commodity pool operator or commodity trading
advisor disclosure document provided by the Company or any of
its Subsidiaries to any client did not contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
(xiv) Tremont TASS (Europe) Limited ("TTEL") is regulated by
the SFA. All investment business activities of TTEL have been
carried on in accordance with the provisions of the FSA, any
regulation made under the FSA and the rules of the SFA. All
directors and employees of TTEL required to be registered
persons under the rules of the SFA are so registered. TTEL has
adopted, and in all respects observed, procedures complying
with all laws and regulations intended to combat
money-laundering and insider dealing which apply to TTEL, its
directors and employees. TTEL has not received any notice that
SFA has initiated any administrative proceeding or
investigation into the business or operations of TTEL or any
of its principal employees. There is no unresolved violation
or exception by SFA with respect to any report or statement by
25
SFA relating to any examination of TTEL. TTEL has not, and
none of its directors or employees has, been the subject of
any censure, disciplinary hearings or fines by the SFA or any
other Governmental Authority. Since it became an authorized
person, TTEL has not had cause to notify the SFA of any
material matter and there are no entries on the Complaints and
Breaches Register of TTEL kept in accordance with the rules of
the SFA.
(xv) Tremont Investment Management, Inc. ("TIMI") has timely
filed, or caused the timely filing of, all material forms,
reports, registration applications, prospectuses (and other
similar offering documents) schedules and other documents,
together with any amendments required to be made with respect
thereto, that were required to be filed with any Governmental
Authority, in connection with The Tremont Masters Fund and has
paid all fees and assessments due and payable in connection
therewith. TIMI is and has been duly registered as an advisor
in the categories of investment counsel and portfolio manager
and limited market dealer under the Securities Act (Ontario).
All directors, officers and employees of TIMI required to be
registered persons under the Securities Act (Ontario) are so
registered. Such registrations are in full force and effect
and good standing and TIMI is not in default or breach of any
condition of its registrations and no proceeding is pending or
threatened to revoke or limit such registrations.
(j) Taxes. Except insofar as disclosed in Schedule 4.1(j)
to the Company Disclosure Schedule:
(i) (A) All federal, state and other material Tax Returns with
respect to the Company, any of its Subsidiaries or any of the
Funds or any affiliated, combined or unitary group of which
the Company or any Subsidiary of the Company is or has been a
member required to be filed on or prior to the Closing Date
(taking into account any extensions of time to file) have (or
by the Effective Time will have) been duly and timely filed
and all such Tax Returns are complete and accurate in all
material respects and (B) the Company, all Subsidiaries of the
Company and the Funds have timely paid (or there have been
paid on their behalf) all Taxes shown as due and payable on
such Tax Returns (other than Taxes that are being contested in
good faith) or have been properly reserved for in the books
and records of the Company, such Subsidiary of the Company or
such Fund in accordance with GAAP;
(ii) The Company and each Subsidiary of the Company, have
complied with all material requirements in relation to the
payment and withholding of Taxes;
(iii) No agreement or other document waiving or extending the
statute of limitations or the period of assessment or
collection of any Taxes payable by the Company or any
Subsidiary of the Company has been filed or entered into with
any Governmental Authority;
26
(iv) The Company has not received any written notice of any
action, suit, proceeding, audit, deficiency or claim now
proposed or pending against or with respect to the Company or
any Subsidiary of the Company;
(v) Neither the Company nor any Subsidiary of the Company is a
party to or bound by or has any obligation under any Tax
allocation, sharing, indemnity or similar agreement or
arrangement; (including any advance pricing agreement, closing
agreement or other agreement relating to Taxes with any Taxing
Authority);
(vi) Neither the Company nor any Subsidiary of the Company is,
or has been, a United States real property holding company
within the meaning of Section 897(c)(2) of the Code;
(vii) Neither of the Company nor any Subsidiary of the Company
is a "bank" as defined in Section 581 of the Code;
(viii) No power of attorney with respect to any Taxes of the
Company or any Subsidiary of the Company has been executed or
filed with any taxing authority;
(ix) No liens for Taxes exist with respect to any assets or
properties of the Company, or any Subsidiary of the Company
except for statutory liens for Taxes not yet due or contested
in good faith;
(x) No federal, state, local or non-U.S. audits or other
administrative proceedings or court proceedings are presently
pending with regard to any federal, state, local or non-U.S.
income or franchise Taxes or material other federal, state,
local or non-U.S. Taxes or Tax Returns of the Company or any
Subsidiary of the Company. The Company has not received any
written notice of any material issues relating to Taxes raised
from the relevant Taxing Authority during any presently
pending audit or examination;
(xi) Neither the Company nor any Subsidiary of the Company has
agreed to or is required to make any material adjustment under
Section 481(a) of the Code or any similar provision of
non-U.S. law that would affect any taxable year beginning
after the date hereof;
(xii) Neither the Company nor any Subsidiary of the Company
has with regard to any assets or property held or acquired by
any of them, filed a consent to the application of Section
341(f) of the Code or agreed to have Section 341(f)(2) of the
Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned
by the Company or any Subsidiary of the Company;
(xiii) Each Fund which is qualified as a "registered
investment company" under subchapter M of the Code has been
managed in a manner consistent with its qualification as a
"registered investment company" under Subchapter M of the
27
Code. No such Fund is subject to the payment of Tax for any
taxable year by reason of its failure to satisfy the minimum
distribution requirements of Section 852(a)(1) of the Code;
(xiv) Neither the Company nor any Subsidiary of the Company
has constituted either a "distributing corporation" or a
"controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the
Code (i) in the two (2) years prior to the date of this
Agreement or (ii) in a distribution which could otherwise
constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the
Code) in conjunction with the Merger;
(xv) Parent has received complete copies of (A) all material
federal, state and other material income or franchise Tax
Returns of the Company and each Subsidiary of the Company
relating to the taxable periods ended since December 31, 1998
and (B) any audit report issued within the last three years
relating to any material Taxes due from or with respect to the
Company or any Subsidiary of the Company;
(xvi) The Company has not received any written notice of any
claim by a Taxing Authority in a jurisdiction where the
Company or any Subsidiary of the Company does not file Tax
Returns stating that the Company, or such Subsidiary, is or
may be subject to taxation by that jurisdiction;
(xvii) No property owned by the Company or any Subsidiary of
the Company (i) is property required to be treated as being
owned by another Person pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and
in effect immediately prior to the enactment of the Tax Reform
Act of 1986, (ii) constitutes "tax-exempt use property" within
the meaning of Section 168(h)(1) of the Code or (iii) is
"tax-exempt bond financed property" within the meaning of
Section 168(g) of the Code;
(xviii) There is no contract, agreement, plan or arrangement
covering any person that, individually or collectively, could
give rise to the payment of any amount that would not be
deductible by the Parent, the Company or any of their
respective Affiliates by reason of Section 280G of the Code,
or would constitute compensation in excess of the limitation
set forth in Section 162(m) of the Code; and
(xix) Neither the Company nor any Subsidiary of the Company is
subject to any private letter ruling of the IRS or comparable
rulings of other Taxing Authorities issued solely in respect
of the Company or any Subsidiary of the Company.
(xx) At the time of issuance of each of the life insurance
policies (each individually, an "Insurance Policy") issued by
TII and for the life of each Insurance Policy: (i) provided
28
that each purchaser of such Insurance Policy has an insurable
interest in the life of the insured under each Insurance
Policy and in the amount of insurance applied for, (A) each
Insurance Policy qualifies as life insurance under applicable
insurance law, (B) each Insurance Policy qualifies as a life
insurance contract under the guideline premium test of Section
7702 of the Code and will be treated as life insurance for
current federal income Tax purposes, (C) neither the Company
nor any of its Subsidiaries has caused any Insurance Policy to
fail the guideline premium test of Section 7702 of the Code or
some other current Tax law provision thereby causing the
purchaser to be in receipt or accrual of the account value of
an Insurance Policy, including increments thereon, (D) neither
the Company nor any of its Subsidiaries has caused any
Insurance Policy to fail the guideline premium test of Section
7702 of the Code or some other current Tax law provision
thereby causing the death benefits paid under the policies to
be ineligible for the exclusion from gross income under
Section 101(a) of the Code, (ii) each of the Insurance
Policies are variable contracts as defined in Section 817(d)
of the Code, (iii) the segregated asset account(s) underlying
the Insurance Policies comply with Section 817(h) of the Code,
(iv) no purchaser of an Insurance Policy will be treated as
owner for Tax purposes of the assets of any separate account
to which Insurance Policy account values have been allocated,
and, (v) provided that, for each Insurance Policy, premiums
are paid, death benefits are reduced and each policy owner
exercises its rights under the Insurance Policy only in
accordance with the plan for such Insurance Policy as
specified by TII at issue and from time to time thereafter, no
Insurance Policy has become a modified endowment contract
under Section 7702A of the Code.
(xxi) At the time of issuance of each of the annuity policies
(each individually, an "Annuity Policy") issued by TII and for
the life of each Annuity Policy: (i) each of the Annuity
Policies are variable contracts as defined in Section 817(d)
of the Code, (ii) the segregated asset account(s) underlying
the Annuity Policies comply with Section 817(h) of the Code;
and (iii) no purchaser of an Annuity Policy will be treated as
owner for Tax purposes of the assets of any separate account
to which Annuity Policy account values have been allocated.
(k) Litigation. There is not, and since January 1, 1998,
there has not been, any litigation, administrative, arbitral or other
proceeding, claims, actions, or governmental or regulatory investigations
pending or, to the Knowledge of the Company, threatened against the Company, any
Subsidiary of the Company or any of the Funds in connection with their
respective businesses or the transactions contemplated by this Agreement and
there is no injunction, judgment, decree or regulatory restriction imposed upon
either the Company or any Subsidiary of the Company. With respect to the pending
litigations, proceedings, claims, actions or investigations listed on Schedule
4.1(k) of the Company Disclosure Schedule, individually and in the aggregate, no
adverse determination would reasonably be expected to have a Material Adverse
Effect with respect to the Company. There is no lawsuit or claim by the Company
29
or any Subsidiary of the Company currently pending or which the Company or any
Subsidiary of the Company currently intends to initiate against any other
Person.
(l) Labor and Employment Matters; Benefit Plan Obligations.
(i) Neither the Company nor any of its Subsidiaries is
delinquent in any respect in payments to any of its current or
former officers, directors, employees, consultants, or agents
for any wages, salaries, commissions, bonuses, benefits,
expenses or other compensation for any services performed by
them or amounts required to be reimbursed to them; and in the
event of termination of the employment of any employee of the
Company, any of its Subsidiaries or any of the Funds
("Employee"), none of the Company or any of its Subsidiaries
will be liable to any such Employee under any agreement in
effect at the Effective Time for so-called "severance pay",
incentive pay, liquidated damages or any other payments or
benefits, including, without limitation, post-employment
health care, pension or insurance benefits.
(ii) Since January 1, 1998, none of the Company or any
Subsidiary of the Company has had any claim made against it by
any Person before any Governmental Authority in respect of
employment with it for discrimination or harassment on account
of sex, race or other characteristic protected by Applicable
Law and there are no such proceedings pending or, to the
Company's Knowledge, threatened.
(iii) Schedule 4.1(l)(iii) of the Company Disclosure Schedule
contains a true and complete list of each Benefit Plan. With
respect to each Benefit Plan, the Company has heretofore
delivered or made available to Parent true and complete copies
of each of the following documents: (A) a copy of the Benefit
Plan and any amendments thereto; (B) a copy of the most recent
annual report on IRS Form 5500; (C) a copy of the most recent
summary plan description (including supplements) required
under ERISA with respect thereto; (D) if the Benefit Plan is
funded through a trust or any third party funding vehicle, a
copy of the trust or other funding agreement and the latest
financial statements thereof and all related agreements; and
(E) the most recent determination letter or pending
determination letter received from the IRS with respect to
each Benefit Plan intended to qualify under Section 401 of the
Code.
(iv) None of the Company or any Subsidiary of the Company or
any ERISA Affiliate (A) has ever maintained any Benefit Plan
which has been subject to Title IV of ERISA or any similar
Applicable Law of any other jurisdiction or (B) has ever
provided or agreed to provide health care or any other welfare
benefits (as described in Section 3(1) of ERISA) to any
Employees after their employment is terminated (other than as
required by part 6 of Subtitle B of title I of ERISA or any
similar Applicable Law of any other jurisdiction).
(v) No Benefit Plan is a "multiemployer pension plan", as
defined in section 3(37) of ERISA.
30
(vi) Each Benefit Plan has been operated in all material
respects in accordance with its terms and Applicable Law,
including but not limited to ERISA and the Code. Each Benefit
Plan which is intended to be "qualified" within the meaning of
Code section 401(a) is so qualified and has received a
favorable determination letter to such effect.
(vii) To the Knowledge of the Company, there is no matter
pending with respect to any of the Benefit Plans before any
Governmental Authority. There are no pending or, to the
Knowledge of the Company, threatened or anticipated actions,
suits, or claims by or on behalf of any Benefit Plan, by any
Employee or beneficiary covered thereunder, or otherwise
involving any such Benefit Plan (other than routine claims for
benefits).
(viii) No stock or other security issued by the Company forms
or has formed a material part of the assets of any Benefit
Plan.
(ix) To the Knowledge of the Company, any individual who
performs services for the Company, any of its Subsidiaries or
any of the Funds (other than through a contract with an
organization other than such individual) and who is not
treated as an Employee of the Company, any of its Subsidiaries
or Funds for federal income tax purposes by the Company, such
Subsidiary or Fund is not an Employee for such purposes.
(x) None of the Funds has or has had any employees.
(xi) With respect to each Benefit Plan that is maintained
outside of the U.S. primarily for the benefit of persons
substantially all of whom are nonresident aliens (a "Foreign
Plan"):
(1) all employer and Employee contributions to each
Foreign Benefit required by law or by the terms of
such Foreign Plan have been made, or, if applicable,
accrued in accordance with normal accounting
practices.
(2) the fair market value of the assets of each
funded Foreign Plan, the liability of each insurer
for any Foreign Plan funded through insurance or the
book reserve established for any Foreign Plan,
together with any accrued contributions, is
sufficient to procure or provide for the accrued
benefit obligations, as of the Closing Date, with
respect to all current or former participants in such
plan according to the actuarial assumptions and
valuations most recently used to determine employer
contributions to such Foreign Plan and no transaction
contemplated by this Agreement shall cause such
assets or insurance obligations to be less than such
benefit obligations; and
31
(3) each Foreign Plan required to be registered has
been registered and has been maintained in good
standing with applicable regulatory authorities.
(xii) None of the Employees is represented in his or her
capacity as an Employee by any labor organization; Neither the
Company nor any of its Subsidiaries has recognized any labor
organization nor has any labor organization been elected as
the collective bargaining agent of any of such Employees, nor
has the Company or any of its Subsidiaries entered into any
collective bargaining agreement or union contract recognizing
any labor organization as the bargaining agent of any
Employees; there is no union organization activity involving
any of the Employees, pending or, to the Knowledge of the
Company or any of its Subsidiaries, threatened, nor has there
ever been union representation involving any of the Employees;
there is no picketing, pending or, to the Knowledge of the
Company or any of its Subsidiaries, threatened, and there are
no strikes, slowdowns, work stoppages, other job actions,
lockouts, arbitrations, grievances or other labor disputes
involving any of the Employees, pending or, to the Knowledge
of the Company, threatened; there are no complaints, charges
or claims against the Company or any of its Subsidiaries
pending or, to the Knowledge of the Company, threatened which
could be brought or filed, with any public or governmental
authority, arbitrator or court based on, arising out of, in
connection with, or otherwise relating to the employment or
termination of employment or failure to employ by the Company
or any of its Subsidiaries, of any individual; the Company and
each of its Subsidiaries is in compliance with all laws,
regulations and orders relating to the employment of labor,
including all such laws, regulations and orders relating to
wages, hours, the Worker Adjustment and Retraining
Notification Act and any similar state or local "mass layoff"
or "plant closing" law ("WARN"), collective bargaining,
discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of withholding
and/or social security taxes and any similar tax except for
immaterial non-compliance; and there has been no "mass layoff"
or "plant closing" as defined by WARN with respect to the
Company or any of its Subsidiaries within the six (6) months
prior to the Closing.
(m) Board Approval. The Board of Directors of the Company,
by resolutions duly adopted at a meeting duly called and held and not
subsequently rescinded or modified in any way, has duly (i) determined that this
Agreement and the Merger are advisable and in the best interests of the Company
and its stockholders, (ii) approved this Agreement and the Merger and (iii)
recommended that the stockholders of the Company adopt this Agreement. Assuming
the accuracy of the representations and warranties set forth in Section 4.2(i),
the Board of Directors of the Company has taken the necessary action to make
inapplicable to this Agreement, the Stockholders Agreement and the transactions
contemplated hereby and thereby the restrictions on business combinations set
forth in Section 203 of the DGCL and any other "fair price," "moratorium,"
"control share," "business combination," "affiliate transaction" or other
applicable antitakeover laws.
32
(n) Vote Required. Assuming the accuracy of the
representations and warranties set forth in Section 4.2(i), the affirmative vote
of the holders of a majority of the voting power of the Company Common Stock to
adopt this Agreement (the "Required Company Vote") is the only vote of the
holders of any class or series of Company Capital Stock necessary to adopt this
Agreement and approve the transactions contemplated hereby.
(o) Contracts.
(i) Schedule 4.1(o) of the Company Disclosure Schedule sets
forth under separate headings, and the Company has made
available to the Parent true, correct and complete copies of:
(A) each Company Contract that is not cancelable without
penalty by the Company, any of its Subsidiaries or any Fund
party thereto upon 90 days or less notice or that involves the
receipt or payment by the Company, such Subsidiary or such
Fund in the prior fiscal year (or is reasonably likely to
involve the receipt of payment by the Company, such Subsidiary
or such Fund in the current fiscal year) of an amount in
excess of $100,000, (B) each Company Contract with any one or
more of the directors or executive officers or members of
their Immediate Families or entities in which any of them has
greater than a 5% equity interest, (C) each Company Contract
that is required to be described in the Regulatory Reports
publicly disclosed and filed with the SEC or to be filed as an
exhibit thereto (which Company Contract is described in the
Regulatory Reports publicly disclosed and filed with the SEC
or filed as an exhibit thereto), (D) each Advisory Agreement,
(E) each Company Contract with respect to or involving
employment, severance, product design or development, personal
services, consulting, non-competition or indemnification
(including, without limitation, any Company Contract involving
employees of the Company, any of its Subsidiaries or any of
the Funds); (F) each Company Contract with respect to or
involving licensing, merchandising or distribution; (G) each
Company Contract granting a right of first refusal or first
negotiation; (H) each Company Contract that is a shareholders,
partnership, joint venture or similar agreement; (I) each
Company Contract for the acquisition, sale or lease of
material properties or assets of the Company, any of its
Subsidiaries or any Fund (by merger, purchase or sale of
assets or stock or otherwise) entered into since its
inception; (J) each Company Contract with any Governmental
Authority; (K) each loan or credit agreement, mortgage,
indenture, instrument or other Company Contract evidencing
indebtedness for borrowed money by the Company, any of its
Subsidiaries or Funds or any such Company Contract pursuant to
which indebtedness for borrowed money may be incurred; (L)
each Company Contract that purports to limit, curtail or
restrict the ability of the Company, any of its Subsidiaries
or any of the Funds to compete in any geographic area, line of
business or otherwise or with any Person, or to obtain
products or services from or engage in business transactions
with, any other Person; (M) each Company Contract with or with
respect to Mutual Risk Management Ltd.; (N) each Company
Contract between the Company, any of its Subsidiaries or any
of the Funds and any other Person (other than a wholly owned
Subsidiary of the Company) in which the Company, any of its
Subsidiaries or any of the Funds owns an equity interest; (O)
33
each other Company Contract material to the business,
governance, operations or financial condition of the Company,
any of its Subsidiaries or any of the Funds, and (P) each
commitment and agreement to enter into any of the foregoing.
Each Company Contract set forth or required to be set forth in
Schedule 4.1(o) of the Company Disclosure Schedule is referred
to herein as a "Material Contract."
(ii) Each of the Company, each of its Subsidiaries and each
Fund which is a party to any Material Contract has duly
performed all its material obligations under such Material
Contract, in each case to the extent that such obligations
have accrued; each Material Contract is in full force and
effect and constitutes the valid and legally binding
obligation of the Company, such Subsidiaries and each Fund, as
applicable, enforceable according to its terms; and no breach
or default, alleged breach or default, or event which
constitutes or would (with the passage of time, notice or
both) constitute a material breach or default thereunder on
the part of the Company, any of its Subsidiaries or any Fund,
or, to the Knowledge of the Company, any other party thereto,
has occurred or, as a result of this Agreement or the
performance by the Company of any of its covenants or
obligations hereunder, will occur.
(iii) Except for those limits or requirements in cases (A) or
(B) immediately below as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect with respect to the Company, no Company Contract to
which the Company, any of its Subsidiaries or any of the Funds
is a party or subject to (A) limits the freedom of the
Company, or any of its Subsidiaries or any of the Funds to
compete in any line of business, any geographic area or
otherwise or with any Person; or (B) contains any requirement
of exclusive dealing with any other Person anywhere in the
world or with respect to any product, and no such Contract as
described in such clauses (A) and (B) or any other Company
Contract would be or purports to be valid and legally binding
on the Parent or any of its Affiliates (other than the Company
and its Subsidiaries) upon, and at any time after, the
Closing, regardless of the scope of limits or requirements.
(iv) The Company has made or caused to be made available to
the Parent copies of all sales, marketing and account
solicitation agreements and marketing arrangements relating to
its investment advisory activities.
(p) Brokerage or Finder's Fees. Other than the Company
Financial Advisor, whose fees and expenses will be borne by the Company, neither
the Company nor any of its Subsidiaries has incurred any liability to any
broker, finder or agent for any fees or commissions or similar compensation with
respect to the transactions contemplated by this Agreement.
(q) Insurance. The Company, its Subsidiaries and the Funds
maintain with reputable insurers such worker's compensation, comprehensive
property and casualty, liability, errors and omissions, fidelity and other
insurance as is described on Schedule 4.1(q) of the Company Disclosure Schedule,
34
which insurance is, in the reasonable opinion of the Company, sufficient in all
material respects for the operation of the business of the Company and its
Subsidiaries and Funds as currently conducted.
(r) Opinion of the Company Financial Advisor. The Company
has received the opinion of the Company Financial Advisor, dated the date of
this Agreement, to the effect that, as of such date, the Merger Consideration is
fair, from a financial point of view, to the holders of Company Common Stock, a
copy of which opinion has been made available to the Parent.
(s) No Parent Capital Stock. The Company does not own or
hold directly or indirectly any shares of common stock of the Parent or any
other capital stock of the Parent, or any options, warrants or other rights to
acquire any capital stock of the Parent, or in each case, any interests therein.
(t) Sponsored Collective Investment Vehicles and
Commodities Advisory Matters.
(i) Schedule 4.1(t) of the Company Disclosure Schedule sets
forth a true, correct and complete list of each Fund,
including each Fund's name, its jurisdiction of organization
and authorized ownership interests (and the ownership
interests of the Company and its Subsidiaries in each Fund),
and the jurisdictions in which each of them is licensed or
qualified or registered to do business.
(ii) True, correct and complete copies of the offering
documents, subscription agreements, administrative services
agreements, distribution or placement agency agreements,
solicitation agreements and custody agreements, as applicable,
or any similar agreements, in any case pertaining to the Funds
and used since January 1, 1998 have been made available to the
Parent. Such offering documents did not, at any time such
offering documents were made available to investors or
prospective investors in the Funds, contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
(iii) True, correct and complete copies of the audited
financial statements of each of the Funds for the fiscal years
completed on or after December 31, 1998 or its inception,
whichever is later, through its most recent fiscal year ended
on or prior to December 31, 2000 have been made available to
the Parent. Each of such financial statements presents fairly,
in all material respects, the consolidated financial position
of such Fund in accordance with GAAP applied on a consistent
basis (except as otherwise noted therein) at the respective
date of such financial statements.
(iv) All securities of which any of the Funds is the issuer
were sold pursuant to a valid exemption from the registration
35
requirements of the Securities Act and other applicable
Securities Laws and in compliance with Applicable Law.
(v) Since its inception, each Fund has been operated and is
currently operating in compliance in all material respects
with its respective investment objectives and policies, its
constituent documents and Applicable Law. Since its inception,
each of the Funds that has been (i) offered to United States
investors or (ii) organized in any jurisdiction within the
United States has been excluded from the definition of an
"investment company" under the Investment Company Act by
virtue of Section 3(c)(1) or Section 3(c)(7) thereof. Since
its inception, each of the Funds that is a commodity pool
within the meaning of the CEA is an "exempt pool" within the
meaning of Rule 4.7 promulgated by the CFTC under the CEA,
each Person with respect to which TFI acts as a commodity
trading advisor is a "Qualified Eligible Person" within the
meaning of such Rule 4.7, and TFI and the Fund have been in
compliance with the disclosure reporting and record keeping
requirements of such Rule 4.7(b).
(vi) None of TFI, the Funds or any direct or indirect
"principal" or "Associated Person" (as such terms are defined
in the CEA or the rules of the NFA) thereof has been enjoined,
indicted, convicted or made the subject of disciplinary
proceedings, consent decrees or administrative orders on
account of any violation of the Securities Laws, the CEA or
the rules or interpretations of any Self-Regulatory
Organization or, except as set forth in Schedule 4.1(t)(vi) of
the Company Disclosure Schedule, has been criticized by the
CFTC or NFA in, as a result of or following any regulatory
audit by the NFA.
(u) Termination of Relationships. As of the date hereof,
neither the Company nor any of its Subsidiaries has received any notice since
June 30, 2000, and no other notice is pending, that any Fund or any other Person
to whom the Company or any of its Subsidiaries renders investment management or
investment advisory services that individually or in the aggregate are material
to the business of the Company is terminating or is planning to terminate its
relationship with the Company and/or any of its Subsidiaries or will reduce
materially its use of the services of the Company and any of its Subsidiaries.
As of the date hereof, the Company has no Knowledge that any Fund or any other
Person to whom the Company or any of its Subsidiaries renders investment
management or investment advisory services that individually or in the aggregate
are material to the business of the Company plans to terminate its relationship
with the Company and/or any of its Subsidiaries or plans to reduce materially
its use of the services of the Company and any of its Subsidiaries. For the
purposes of this Section 4.1(u), each of the Funds will be deemed to be material
to the business of the Company and its Subsidiaries.
(v) Absence of Certain Payments. To the Knowledge of the
Company, none of the Company, any of its Subsidiaries or any Person acting on
behalf of the Company and any of its Subsidiaries has made any payment to, or
conferred any benefit, directly or indirectly, on suppliers, clients, employees
or agents of suppliers or clients, or officials or employees of any Governmental
36
Authority or any political parties or candidates for office, that was unlawful
in the place where, and at the time when, such payment or benefit was given or
received, or, in the case of payments to or benefits conferred upon
representatives of a Governmental Authority referred to above, would have been
unlawful under the laws of the United States if such laws were applicable to
such payment or benefit and to such officials or employees.
(w) Privacy Rules. The Company and its Subsidiaries and the
Funds, to the extent each is a "financial institution" (as defined in the GBA),
have complied, to the extent required, with the GBA and the rules and
regulations promulgated pursuant thereto, including, without limitation,
Regulation S-P issued by the SEC and the privacy rules issued by the Federal
Trade Commission and expected to be issued by the CFTC (collectively, the
"Privacy Rules"), and each such Financial Institution has provided the privacy
notices, in the form and to the extent required by the GBA and the Privacy
Rules, and has taken such other actions as may be required thereunder.
(x) Technology and Intellectual Property.
(i) The Technology Systems are adequate in all material
respects for their intended use and for the operation of the
respective businesses of the Company and its Subsidiaries as
are currently operated and as necessary after the Closing Date
in substantially the same manner as such businesses have been
operated prior thereto. The Company or one or more of its
wholly owned Subsidiaries owns or has the right to use, free
and clear of Encumbrances, all components of the Technology
Systems that are reasonably necessary to the normal operations
of such businesses. There has not been any material
malfunction with respect to any of the Technology Systems
since January 1, 1998 that has not been remedied or replaced
in all material respects. The completion of the transactions
contemplated by this Agreement will not materially alter or
impair the ownership or right of the Company or its
Subsidiaries to use the components of the Technology Systems.
No trade secret, know-how, model, process, formula, database
or Software created by the Company or any of its Subsidiaries
included in the Intellectual Property of the Companies has
been disclosed or authorized to be disclosed to any third
party other than for use in connection with the businesses of
the Company and its Subsidiaries or pursuant to a
confidentiality or non-disclosure agreement that reasonably
protects the interest of the Company and its Subsidiaries and
the Funds in and to such matters.
(ii) Schedule 4.1(x)(ii) of the Company Disclosure Schedule
sets forth, for the Intellectual Property owned by, or
licensed to, the Company or any of its Subsidiaries, including
those jointly with others (such schedule specifies any as
such), a complete and accurate list of all (whether registered
or unregistered, any applications therefor and whether owned
or licensed) patents, trademarks, copyrights, trade secrets
and Software. The Company and its wholly owned Subsidiaries
own or possess adequate licenses or other rights to use, free
and clear of Encumbrances, orders and arbitration awards, all
of their Intellectual Property for the operation of the
respective businesses of the Company and the Subsidiaries as
are currently operated and as necessary after the Closing Date
37
in substantially the same manner as such businesses have been
operated prior thereto. All Intellectual Property
registrations owned by the Company or any Subsidiary of the
Company are valid and subsisting, are held in the name of the
Company or one of its Subsidiaries and are validly maintained.
No Intellectual Property application or registration owned by
the Company or any Subsidiary of the Company is the subject of
any pending, existing or threatened opposition, interference,
cancellation proceeding or other legal or governmental
proceeding before any registration authority in any
jurisdiction. The conduct of the respective businesses of the
Company and its Subsidiaries and the Funds does not infringe
in any material respect upon any Intellectual Property right
owned or controlled by any third party. There are no material
claims, proceedings or actions pending or, to the Company's
Knowledge, threatened, and none of the Company, any of its
Subsidiaries or any of the Funds has received any notice of
any claim or suit (A) alleging that the activities of the
Company, any of its Subsidiaries or any of the Funds infringe
upon or constitute the unauthorized use of the proprietary
rights of any third party or (B) challenging the ownership,
use, validity or enforceability of any Intellectual Property
owned or controlled by the Company or any Subsidiary of the
Company, nor is there, to the Company's Knowledge, a valid
basis for any such claim or suit. To the Company's Knowledge,
no third party is infringing upon any Intellectual Property
owned by the Company or any of its Subsidiaries, and no such
claims have been made by the Company.
4.2 Representations and Warranties of the Parent and the
Merger Sub. Except as set forth in writing in the disclosure schedule delivered
by the Parent to the Company prior to the execution of this agreement (the
"Parent Disclosure Schedule") (each section of which qualifies the
correspondingly numbered representation and warranty or covenant to the extent
specified therein) each of the Parent and the Merger Sub represents and warrants
to the Company as follows:
(a) Organization, Standing and Power. Each of the Parent
and the Merger Sub has been duly incorporated and is validly existing and in
good standing under the Applicable Laws of the State of Delaware, has all the
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted, and is duly
qualified and in, if applicable, good standing to do business in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such licensing, qualification or, if
applicable, good standing necessary other than in such jurisdictions where the
failure to be so licensed or qualified or, if applicable, in good standing would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to the Parent. The copies of the charter and by-laws
and any amendments thereto of the Parent and the Merger Sub that were previously
furnished to the Company are true, complete and correct copies of such documents
as in effect on the date of this Agreement. All of the outstanding shares of
capital stock of Merger Sub are duly authorized validly issued and nonassessable
and are owned beneficially and of record, by the Parent or a Subsidiary which is
wholly owned, directly or indirectly, by the Parent, free and clear of any
Encumbrances other than Permitted Encumbrances.
38
(b) Authority of the Parent and the Merger Sub; Execution
and Delivery. Each of the Parent and the Merger Sub has the corporate power and
authority to enter into and carry out its obligations under this Agreement. The
execution and delivery by each of the Parent and the Merger Sub of this
Agreement and the performance by each of them of the transactions contemplated
hereby have been duly and validly authorized and approved by all necessary
corporate action on the part of each of them, and no other corporate or
stockholder proceedings on the part of either of them are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby and
thereby. Each of the Parent and the Merger Sub has duly executed and delivered
this Agreement. Assuming the due authorization, execution and delivery of this
Agreement by the Company, this Agreement constitutes and assuming the due
authorization, execution and delivery thereof by each other party thereto, all
instruments of conveyance and other documents executed and delivered or to be
executed and delivered by them, as contemplated by this Agreement, constitute,
or when so executed and delivered will constitute, the legal, valid and binding
agreements, instruments and obligations of each of them, enforceable against
each of them in accordance with their respective terms except as such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
transfer, moratorium, reorganization and similar Applicable Laws of general
application relating to or affecting the rights and remedies of creditors and by
the application of general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law).
(c) Consents; No Conflict.
(i) Other than filings and/or notices (A) pursuant to Section
2.3, (B) under the HSR Act or the Securities Laws, (C)
required under a foreign antitrust or trade regulation law, or
(D) required to be made with any applicable Self-Regulatory
Organization, neither the Parent nor the Merger Sub is
required to obtain the consent, authorization or approval of,
or submit any notice, report or any other filing with, any
Governmental Authority or any third party or to obtain any
consent, permit, license or franchise in connection with the
execution, delivery and performance of this Agreement by the
Parent or the Merger Sub, respectively, except, in the case of
any third party, as would not reasonably be expected to have a
Material Adverse Effect with respect to the Parent.
(ii) The execution, delivery and performance of this Agreement
by each of the Parent and the Merger Sub and the consummation
of the transactions contemplated hereby will not conflict
with, result in the termination of, contravene or constitute a
default under, or be an event which, with the giving of notice
or passage of time or both will become a default under, or
give to any other Person any right of termination pursuant to
any of the terms, conditions or provisions of or under (A) any
Applicable Law (provided, as to consummation, the filings,
reports and notices are made, and approvals are obtained, as
referred to in Section 4.2(c)(i)), (B) the charter and by-laws
of the Parent or the Merger Sub or (C) any contract,
agreement, indenture, mortgage, deed of trust, note, bond,
franchise, lease, plan, license or other instrument,
arrangement or other obligation binding upon the Parent or the
Merger Sub, or to which the property of the Parent or the
39
Merger Sub is subject, except in the case of clause (A) or (C)
as would not reasonably be expected to have a Material Adverse
Effect with respect to the Parent.
(d) Litigation. Except as set forth on Schedule 4.2(d) of
the Parent Disclosure Schedule, as of the date hereof, there are no claims,
actions, suits, proceedings or investigations pending or, to the Parent's
Knowledge, threatened against the Parent or any Subsidiary of the Parent, or any
properties or rights of the Parent or any Subsidiaries of the Parent, before any
Governmental Authority that (i) seek to question, delay or prevent the
consummation of the Merger or the other transactions contemplated hereby or (ii)
would reasonably be expected to affect adversely the ability of the Parent to
fulfill its obligations hereunder, including the Parent's obligations under
Article II and Article III.
(e) Board Approval of the Parent. The Board of Directors of
the Parent, by resolutions duly adopted at a meeting duly called and held and
not subsequently rescinded or modified in any way, has duly (i) determined that
this Agreement and the Merger are in the best interests of the Parent and its
stockholders; and (ii) approved this Agreement and the Merger.
(f) Board Approval of the Merger Sub. The Board of
Directors of the Merger Sub, by resolutions duly adopted without a meeting by
unanimous consent thereto in writing and not subsequently rescinded or modified
in any way, has duly (i) determined that this Agreement and the Merger are
advisable and in the best interest of the Merger Sub and its stockholder, (ii)
approved this Agreement and the Merger and (iii) recommended that the
stockholder of the Merger Sub adopt this Agreement. Following the adoption of
such resolutions by the Board of Directors of the Merger Sub, the sole
stockholder of the Merger Sub, without a meeting by consent in writing, has duly
adopted this Agreement.
(g) No Other Vote Required. No vote of the holders of any
class or series of the capital stock of the Parent and, except as provided in
Section 4.2(f), any Subsidiary of the Parent is necessary to approve this
Agreement, the Merger or the other transactions contemplated hereby.
(h) Brokerage or Finder's Fees. The Parent has not incurred
any liability to any broker, finder or agent for any fees, commissions or
similar compensation with respect to the transactions contemplated by this
Agreement.
(i) No Company Capital Stock. Neither of the Parent or the
Merger Sub owns or holds directly or indirectly any shares of Company Common
Stock or any other capital stock of the Company, or any options, warrants or
other rights to acquire any shares of Company Common Stock or any other capital
stock of the Company, or in each case, any interests therein, other than
pursuant to the Merger as contemplated by this Agreement or pursuant to the
Stockholders Agreement.
(j) Financing. The Parent has and will have available,
prior to the Effective Time, sufficient funds to pay the Merger Consideration
and the Option Consideration pursuant to this Agreement.
40
(k) No Business Activities. The Merger Sub has not
conducted any activities other than in connection with its organization, the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby. The Merger Sub has no Subsidiaries.
Article V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company. During the period from the
date of this Agreement and continuing until the Effective Time, the Company
agrees as to itself and its Subsidiaries that (except as expressly contemplated
or permitted by this Agreement or as otherwise indicated under separate headings
in Schedule 5.1 of the Company Disclosure Schedule or to the extent that the
Parent (in its sole discretion) shall otherwise consent in writing):
(a) Ordinary Course.
(i) The Company and each of its Subsidiaries shall (and shall
cause the Funds to), and the Company shall use its
commercially reasonable efforts to cause each of Index LLC,
TII, TMRM and FITX to, carry on their respective businesses in
the usual, regular and ordinary course in the same manner as
heretofore conducted, and, to the extent consistent therewith,
shall (and shall cause the Funds to) use all reasonable best
efforts to, and the Company shall use its commercially
reasonable efforts to cause each of Index LLC, TII, TMRM and
FITX to, preserve intact their present lines of business,
business organizations and reputations, maintain their rights,
franchises and permits, keep available the services of their
key officers and key employees, maintain their assets and
properties in good working order and condition, ordinary wear
and tear excepted, and preserve their relationships and
goodwill with clients, suppliers and others having business
dealings with them to the end that their ongoing businesses
shall not be impaired in any material respect at the Effective
Time.
(ii) The Company shall not, and shall not permit any of its
Subsidiaries or the Funds to, and the Company shall use its
commercially reasonable efforts to cause each of Index LLC,
TII, TMRM and FITX not to, (A) enter into any new material
line of business, (B) commit to any capital expenditures other
than capital expenditures in the usual, regular and ordinary
course of business consistent with past practice and not
individually or in the aggregate in excess of $100,000, or (C)
delay or postpone the payment of accounts payable and other
liabilities or accelerate the collection of accounts
receivable, or revalue in any material respect any of its
assets, including, without limitation, writing down the value
of inventory or writing-off notes or accounts receivable other
than in each case in the usual, regular and ordinary course of
business consistent with past practice or as required by GAAP;
(b) Dividends; Changes in Share Capital. The Company shall
not, and shall not permit any of its Subsidiaries to, and shall not propose to,
(i) declare, set aside or pay any dividends on or make other distributions in
41
respect of any of its ownership interests, (ii) split, combine, subdivide or
reclassify any of its ownership interests or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, ownership interests, (iii) adopt a plan of complete or partial liquidation
or resolutions providing for or authorizing such liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization,
(iv) directly or indirectly repurchase, redeem or otherwise acquire any
ownership interests or any securities convertible into or exercisable for any
ownership interests except, subject to and in accordance with Applicable Law,
for the purchase from time to time by the Company of Company Common Stock in the
usual, regular and ordinary course of business consistent with past practice in
connection with funding the Tremont Advisers, Inc. Savings Plan, or (v) make any
other actual, constructive or deemed distribution in respect of any shares of
its capital stock or other ownership interests or otherwise make any payments to
stockholders or equityholders in their capacity as such.
(c) Issuance of Securities. The Company shall not, and
shall not permit any of its Subsidiaries to, and shall use its commercially
reasonable efforts to cause each of Index LLC, TII, TMRM and FITX not to, issue,
deliver or sell, or authorize or propose the issuance, delivery or sale of, any
ownership interests of any class, or enter into any agreement with respect to
any ownership interests, other than the issuance of Company Common Stock upon
the exercise of Company Stock Options outstanding on the date hereof or in
connection with the Tremont Advisers, Inc. Savings Plan in accordance with its
present terms or the issuance of ownership interests by FITX in connection with
capital-raising activities consistent with past practice.
(d) Governing Documents. The Company shall not, and shall
not permit any of its Subsidiaries or the Funds to, and shall use its
commercially reasonable efforts to cause each of Index LLC, TII, TMRM and FITX
not to, amend or propose to amend their respective certificates of
incorporation, by-laws or other governing documents.
(e) No Acquisitions. The Company shall not, and shall not
permit any of its Subsidiaries to, and shall use its commercially reasonable
efforts to cause each of Index LLC, TII, TMRM and FITX not to, acquire or agree
to acquire by merging or consolidating with, or by purchasing a substantial
equity interest in or a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets (other than the acquisition of assets used in the operations
of their respective businesses in the usual, regular and ordinary course of
business consistent with past practice).
(f) No Dispositions. Other than dispositions made in the
usual, regular and ordinary course of business consistent with past practice and
not individually or in the aggregate in excess of $100,000, the Company shall
not, and shall not permit any Subsidiary of the Company to, and shall use its
commercially reasonable efforts to cause each of Index LLC, TII, TMRM and FITX
not to, sell, lease, transfer, pledge, encumber or otherwise dispose of, or
42
agree to sell, lease, transfer, encumber or otherwise dispose of, any of its
assets (including ownership interests of Subsidiaries of the Company).
(g) Investments; Indebtedness. The Company shall not, and
shall not permit any of its Subsidiaries to, and shall use its commercially
reasonable efforts to cause each of Index LLC, TII, TMRM and FITX not to, (i)
make any loans, advances or capital contributions to, or investments in, any
other Person, (ii) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, or otherwise), other
than payments, discharges or satisfactions incurred or committed to in the
usual, regular and ordinary course of business consistent with past practice or
reflected in the most recent consolidated financial statements (or the notes
thereto) of the Company included in the most recent Regulatory Reports filed
prior to the date of this Agreement, or (iii) create, incur, assume or suffer to
exist any indebtedness, guarantees, loans or advances not in existence as of the
date of this Agreement except for short-term indebtedness incurred under the
Company's current short-term facilities (and any replacements thereof) in the
usual, regular and ordinary course of business consistent with past practice,
and which is not individually or in the aggregate in excess of $500,000 and is
reasonably expected by the Company to be repaid by the Company from cash from
continuing operations within 12 months of the incurrence thereof in each case as
such facilities and other existing indebtedness may be amended, extended,
modified, refunded, renewed, refinanced or replaced after the date of this
Agreement, but only if the aggregate principal amount thereof is not increased
thereby, the term thereof is not extended thereby (or, in the case of
replacement indebtedness, the term of such indebtedness is not for a longer
period of time than the period of time applicable to the indebtedness so
replaced) and the other terms and conditions thereof, taken as a whole, are not
less advantageous to the Company and its Subsidiaries than those in existence as
of the date of this Agreement.
(h) Compensation. The Company shall not, and shall not
permit any of its Subsidiaries to, and shall use its commercially reasonable
efforts to cause each of Index LLC, TII, TMRM and FITX not to, (i) make any
increase in or commitment to increase the amount of wages, bonus, severance or
other compensation of any executive officer, director or employee (except with
respect to normal base wage and base salary increases that are granted in the
usual, regular and ordinary course of business consistent with past practice in
connection with normal periodic performance reviews and related compensation and
benefit increases (but not to officers and directors of the Company or its
Subsidiaries); provided that the Company shall notify the Parent in writing
prior to any such increases), (ii) make any increase in or commitment to
increase any profit sharing, retirement, deferred compensation, insurance or
other employee benefits, (iii) issue any additional Company Stock Options,
equity-based awards or shares of Company Common Stock (other than the issuance
of Company Common Stock upon the exercise of Company Stock Options outstanding
on the date hereof or in connection with the Tremont Advisers, Inc. Savings Plan
in accordance with its present terms), adopt or make any commitment to enter
into, adopt, amend in any material manner or terminate any Benefit Plan, or any
other agreement, arrangement, plan or policy between the Company or one of its
Subsidiaries and one or more of its directors, officers or employees, (iv) make
any contribution, other than regularly scheduled contributions, to any Benefit
43
Plan or (v) adopt, approve, ratify or enter into any collective bargaining
agreement, side letter, memorandum of understanding or similar agreement with
any labor union covering the employees of the Company or any of the
Subsidiaries.
(i) Accounting Methods; Income Tax Matters. Except as
required by a Governmental Authority, the Company shall not, nor shall it permit
any of its Subsidiaries to, change its methods of accounting in effect at
December 31, 2000, except as required by changes in GAAP as concurred in by the
Company's independent auditors. The Company shall not, nor shall it permit any
of its Subsidiaries to, (i) change its fiscal year, (ii) make or rescind any
material Tax election, (iii) settle or compromise any material claim, action,
suit, litigation, proceeding, arbitration, investigation, audit, or controversy
in respect of Taxes or (iv) change in any material respect any of its methods of
reporting income, deductions or accounting for federal income Tax purposes from
those employed in the preparation of its federal income Tax Return for the
taxable year ending December 31, 2000.
(j) Contracts. The Company shall not, and shall not permit
any of its Subsidiaries to, (i) except as expressly contemplated or expressly
permitted in this Section 5.1, enter into any Company Contract, other than in
the usual, regular and ordinary course of business consistent with past
practice, enter into a contract that would constitute a Material Contract amend
in any material respect any of the Material Contracts, (ii) enter into any
Company Contract providing for, or amend any Company Contract to provide for,
the taking of any action that would be prohibited hereunder, (iii) enter into
any Company Contract that would be or would purport to be valid and legally
binding on the Parent or any of its Affiliates (other than the Company and its
Subsidiaries) upon, and at any time after, the Closing, including without
limitation any that limits or otherwise restricts the Company or any of its
Subsidiaries or any successor thereto or that could, after the Closing, limit or
restrict the Surviving Corporation and its Affiliates (including but not limited
to the Parent or its Affiliates) or any successor thereto, from engaging or
competing in any line of business, in any geographic area or otherwise or with
any Person, or (iv) terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it is a party. The Company
shall, and shall cause any Subsidiary to, take all steps necessary to enforce,
to the fullest extent permitted under Applicable Law, the provisions of any
Material Contract or any confidentiality or standstill agreements to which it is
a party.
(k) Compromise; Settlement. Neither the Company nor any of
its Subsidiaries shall settle or compromise any pending or threatened claims or
arbitrations, other than settlements that involve solely the payment of money
(without admission of liability) that would not result in an uninsured payment
by or liability of the Company in excess of $100,000 in the aggregate above the
reserves established therefor on the books of the Company as of the date hereof.
(l) Other Actions. The Company shall not, and shall not
permit any of its Subsidiaries to, take any action that would, or fail to take
any action which failure would, or that could reasonably be expected to, result
in, (i) any of the Company's representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, (ii) a material
44
breach of any provision of this Agreement, (iii) any of the conditions to the
Merger set forth in Article VI not being satisfied, or (iv) a material delay in
the consummation of the Merger and the transactions contemplated by this
Agreement.
(m) The Company shall not, and shall not permit any of its
Subsidiaries to, authorize or enter into any agreement to do any of the
foregoing in this Section 5.1.
5.2 Advisory Agreement Consents.
(a) The Company shall obtain written consent to the
assignment or deemed assignment of each Advisory Agreement to which either:
(i) a Fund that is organized in any jurisdiction within the
United States; or
(ii) a Fund that is controlled, directly or indirectly, by the
Company and that is organized in any jurisdiction outside of
the United States is a party.
(b) The Company shall use its reasonable best efforts to
obtain written consent to the assignment or deemed assignment of each Advisory
Agreement to which a Fund, other than any Fund described in either Section
5.2(a)(i) or 5.2(a)(ii), is a party.
(c) The Company shall use its reasonable best efforts to
obtain written consent to the assignment or deemed assignment of (i) each
Advisory Agreement with respect to which, as a result of the transactions
contemplated hereby, written consent to its assignment or deemed assignment is
expressly required by such Advisory Agreement and (ii) each Advisory Agreement
to which a Key Client is a party (in the case of each of clauses (i) and (ii) of
this Section 5.2(c), other than any Advisory Agreement described in Section
5.2(a) or (b)); provided, however, that the Company shall not be required to
take any actions in attempting to obtain the written consent of any client that
could, in the good faith judgment of the Company, adversely affect the client
relationship.
(d) As soon as reasonably practicable following the date
hereof, the Company shall send (or cause to be sent) a notice in form and
substance acceptable to the Parent (the "Notice") to any Person to whom the
Company or any of its Subsidiaries renders investment management or investment
advisory services requesting written consent to the assignment of each Advisory
Agreement and informing the party to such Advisory Agreement: (x) of the
intention to complete such transactions, which will result in a deemed
assignment of such Advisory Agreement; and (y) of the Company's intention to
continue to provide the advisory services pursuant to the existing Advisory
Agreement with such party after the Closing. The Parent shall be provided a
reasonable opportunity to review all such consent materials to be used by the
Company prior to distribution.
45
(e) The Parent agrees that, in the case of each Advisory
Agreement other than any Advisory Agreement described in Section 5.2(a), 5.2(b)
or 5.2(c), consent to the assignment or deemed assignment of such Advisory
Agreement resulting from the transactions contemplated by this Agreement shall
be deemed given for all purposes under this Agreement if the party to such
Advisory Agreement shall not have affirmatively stated prior to the Effective
Time to the Company or any Subsidiary thereof that it does not consent to such
assignment or deemed assignment or intends to terminate such Advisory Agreement
and at least forty-five (45) days have elapsed since the mailing of Notice to
such party pursuant to Section 5.2(d).
(f) Notwithstanding anything to the contrary contained
herein, the covenants of the parties contained in this Section 5.2 are intended
only for the benefit of the parties and for no other Person.
5.3 Acquisition Proposals.
(a) The Company shall not, and shall cause each of its
Subsidiaries, and its and any such Subsidiaries' respective Representatives not
to, directly or indirectly, (i) initiate, solicit, encourage or knowingly
facilitate (including by way of furnishing information or assistance) any
inquiries or expressions of interest or the making of any proposal or offer that
constitutes, or could reasonably be expected to lead to (x) a proposal or offer
with respect to a merger, reorganization, share exchange, recapitalization,
liquidation, dissolution, consolidation or similar transaction involving, or any
purchase or series of related purchases directly or indirectly (including, by
way of lease, exchange, sale, mortgage, pledge, tender offer, exchange offer or
otherwise, as may be applicable), of 5% or more of the assets (based on fair
market value) or any equity interests (in economic or voting power) in, the
Company or any of its Subsidiaries, (y) a breach of this Agreement or the
Stockholders Agreement or any interference with the completion of the Merger or
(z) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing (any of the
foregoing inquiries, expressions of interest, proposals, or offers being
referred to in this Agreement as an "Acquisition Proposal"), (ii) engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any Person relating to an Acquisition Proposal, or
otherwise facilitate the making of, or any effort or attempt to make or
implement, an Acquisition Proposal, or (iii) agree to or recommend to its
stockholders any Acquisition Proposal; provided, however, that nothing contained
in this Section 5.3 shall prevent the Company from (i), based on the advice of
outside legal counsel, complying with Rule 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal or providing any other legally
required disclosure to the stockholders of the Company (provided that, except as
otherwise permitted in this Section 5.3, the Company does not withdraw or
modify, or propose to withdraw or modify, its position with respect to the
Merger or approve or recommend, or propose to approve or recommend, an
Acquisition Proposal), (ii) prior to receipt of the Required Company Vote, and
subject to compliance by the Company with the immediately following sentence,
providing information to, or engaging in any negotiations or discussions with,
any Person who has made an unsolicited bona fide written Acquisition Proposal
if, and only to the extent that (A) the Board of Directors of the Company
determines, in good faith after consultation with, and based upon the advice of,
46
outside legal counsel, that providing such information and engaging in such
discussions or negotiations is required to comply with its fiduciary duties to
the Company's stockholders under Applicable Law, (B) such Acquisition Proposal
is not subject to any financing contingencies, (C) the Board of Directors
determines in good faith that such Acquisition Proposal, if accepted, is
reasonably likely to be consummated taking into account all legal, financial,
regulatory and other aspects of the proposal and the Person making the proposal,
and believes in good faith, after consultation with the Company Financial
Advisor, would, if consummated, result in a transaction more favorable to the
Company's stockholders from a financial point of view than the Merger (any such
more favorable Acquisition Proposal, a "Superior Proposal") and (D) prior to
taking such action and furnishing any information to any such party, the Company
(x) provides reasonable notice to the Parent to the effect that it is taking
such action, (y) provides such information to the Parent (if and to the extent
it has not already done so), and (z) shall have entered into a
confidentiality/standstill agreement on customary terms as advised by outside
legal counsel, and in any event containing terms at least as stringent as those
contained in the Confidentiality Agreement, or (iii) prior to receipt of the
Required Company Vote, recommending such a Superior Proposal to the holders of
Company Common Stock and withdrawing the prior recommendation of this Agreement,
if and only to the extent that, in each case referred to in clause (ii) or (iii)
above, the Board of Directors of the Company determines, in good faith after
consultation with, and based upon the advice of, outside legal counsel, that
taking such action is required to comply with its fiduciary duties to the
Company's stockholders under Applicable Law; provided, however, the Board of
Directors of the Company may not approve or recommend (and in connection
therewith, withdraw or modify its approval or recommendation of this Agreement
or the Merger) an Acquisition Proposal unless such an Acquisition Proposal is a
Superior Proposal (and the Company shall have first terminated this Agreement in
accordance with, and complied with its obligations set forth in, Section 7.1(g)
and the time period referred to in Section 7.1(g) has expired). Prior to
providing any information to or entering into discussions or negotiations with
any Person in connection with an Acquisition Proposal by such Person, the
Company shall notify the Parent immediately (orally and in writing) if any such
inquiries, proposals or offers are received by, any such information is
requested from, or any such discussions or negotiations are sought to be
initiated or continued with, any of its Representatives indicating, in
connection with such notice, the name of such Person and the material terms and
conditions of any proposals or offers and thereafter shall keep the Parent
reasonably and promptly informed on the status and terms of any such proposals
or offers and provide the Parent with a copy of any written Acquisition Proposal
and all amendments and supplements thereto and the status of any such
discussions or negotiations. The Company shall, and shall cause each of its
Subsidiaries and each of the Company's and such Subsidiaries' Representatives
to, immediately cease and cause to be terminated any activities, discussions or
negotiations conducted prior to the date of this Agreement with any parties
other than the Parent and the Merger Sub with respect to any of the foregoing.
The Company agrees that it will immediately take the necessary steps to inform
promptly the individuals or entities referred to in the first sentence of this
Section 5.3(a) of the obligations undertaken in this Section 5.3(a).
47
(b) Neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to the Parent, the approval or recommendation by
such Board of Directors or such committee of the Merger or this Agreement, (ii)
approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal or (iii) cause the Company to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar agreement
related to any Acquisition Proposal, except in each case, in connection with a
Superior Proposal and subject to compliance with Sections 5.3(a) and 7.1(g).
5.4 Obtaining Required Company Vote. The Company shall, as
promptly as practicable following the execution of this Agreement, take all
action necessary in accordance with Applicable Law and its certificate of
incorporation and by-laws to duly call, give notice of, convene and hold as soon
as practicable after the date of this Agreement a meeting of its stockholders
for the purpose of obtaining the Required Company Vote with respect to the
transactions contemplated by this Agreement and, except in connection with a
Superior Proposal and subject to compliance with Sections 5.3(a) and 7.1(g),
shall take all lawful action to solicit the adoption of this Agreement by the
Required Company Vote and the Board of Directors of the Company shall recommend
adoption of this Agreement by the stockholders of the Company. Without limiting
the generality of the foregoing, the Company agrees that its obligations
pursuant to the first sentence of this Section 5.4 shall not be affected by the
commencement, public proposal, public disclosure or communication to the Company
of an Acquisition Proposal. Notwithstanding the foregoing, regardless of whether
the Board of Directors of the Company has withdrawn, amended or modified its
recommendation that its stockholders approve and adopt this Agreement, unless
this Agreement has been terminated pursuant to the provisions of Article VII,
the Company shall be required to hold such a meeting of its stockholders for the
purpose of obtaining the Required Company Vote.
5.5 Access to Information. Upon reasonable notice, the
Company shall (and shall cause its Subsidiaries to) afford to the officers,
employees, accountants, counsel, financial advisors and other Representatives of
the Parent reasonable access during normal business hours, during the period
prior to the Effective Time, to all its facilities, operations, officers,
employees, agents and accountants and its properties, books, contracts,
commitments and records and, during such period, the Company shall (and shall
cause its Subsidiaries to) furnish promptly to the Parent (i) a copy of each
report, schedule, form, statement and other document filed or deemed to be
filed, published, announced or received by it during such period pursuant to the
requirements of Federal or state Securities Laws, as applicable; and (ii) each
report, schedule, form, statement and other document filed or deemed to be filed
with any other Governmental Authority (other than, in the case of clause (i) or
(ii), documents which such party is not permitted to disclose under Applicable
Laws), and (iii) consistent with its legal obligations, all other information
concerning its business, properties and personnel as the Parent may reasonably
request; provided, however, that the Company may restrict the foregoing access
to the extent that (x) a Governmental Authority requires the Company or any of
its Subsidiaries to restrict access to any properties or information reasonably
48
related to any such contract on the basis of Applicable Laws with respect to
national security matters or (y) any Applicable Law requires the Company or its
Subsidiaries to restrict access to any properties or information.
5.6 Covenants of the Parent. During the period from the
date of this Agreement and continuing until the Effective Time, the Parent
agrees as to itself and its Subsidiaries that (except as expressly contemplated
or permitted by this Agreement or as otherwise indicated under separate headings
in Schedule 5.6 of the Parent Disclosure Schedule or to the extent that the
Company (in its sole discretion) shall otherwise consent in writing):
(a) Payment of the Merger Consideration. The Parent shall
not take any action that would, or fail to take any action which failure would,
or could reasonably be expected to, impair the Parent's ability to have
available sufficient funds to pay the Merger Consideration and the Option
Consideration pursuant to this Agreement and otherwise to satisfy its
obligations hereunder.
(b) Consents. The Parent shall use its reasonable
commercial efforts not take any action that would, or fail to take any action
which failure would, or could reasonably be expected to, impede or delay any
consent set forth on Schedule 4.2(c) of the Parent Disclosure Schedule or
Schedule 4.1(g) of the Company Disclosure Schedule or otherwise impede or delay
the consummation of the Merger and the other transactions contemplated by this
Agreement. Prior to the Closing, neither the Parent nor any of its Subsidiaries
shall knowingly contact, in writing or otherwise, any client of the Company or
its Subsidiaries or any other Person who acts as an adviser to or "gatekeeper"
for any client of the Company or its Subsidiaries with respect to matters
related to this Agreement without the prior written approval of the Company.
(c) Control of the Company's Business. Nothing contained in
this Agreement shall be deemed to give the Parent, directly or indirectly, the
right to control or direct the Company's operations prior to the Effective Time.
Prior to the Effective Time, the Company shall exercise, consistent with the
terms and conditions of this Agreement, complete control and supervision over
its operations.
(d) Other Actions. The Parent shall not take any action
that would, or fail to take any action which failure would, or that could
reasonably be expected to, result in, (i) any of the Parent's representations
and warranties set forth in this Agreement being or becoming untrue in any
material respect, (ii) a material breach of any provision of this Agreement,
(iii) any of the conditions to the Merger set forth in Article VI not being
satisfied, or (iv) a material delay in the consummation of the Merger and the
transactions contemplated by this Agreement.
(e) The Parent shall not, and shall not permit the Merger
Sub to, authorize or enter into any agreement to do any of the foregoing in this
Section 5.6.
5.7 Offers of Employment. Except as provided in the
Employment Agreements, the Parent agrees that, immediately following the
Effective Time, it will cause the Surviving Corporation to continue employment
of each of the persons then employed by the Company on terms substantially
similar to the terms of their current employment by the Company, including,
49
without limitation, with respect to salary, vacations and benefits (other than
equity-based arrangements or benefit plans).
5.8 Employee Benefits.
(a) Obligations of the Parent; Comparability of Benefits.
Except as provided in the Employment Agreements, the Parent shall cause the
Surviving Corporation to assume all employment and other related agreements with
respect to any current employee of Company, which shall be performed in
accordance with their terms. In addition, the obligations under each Benefit
Plan as to which Company or any of its Subsidiaries has any obligation with
respect to any current or former employee shall become the obligations of the
Surviving Corporation at the Effective Time; provided, however, as soon as
practicable, the Parent shall, or shall cause the Surviving Corporation to,
provide to the Employees the same benefits which are provided to similarly
situated employees of the Parent immediately prior to the Effective Time.
Notwithstanding the foregoing, nothing herein shall require (A) the continuation
of any particular Benefit Plan or prevent the amendment or termination thereof
or (B) the Parent or the Surviving Corporation to continue or maintain any stock
purchase or other equity plan related to the equity of Company or the Surviving
Corporation or the Parent.
(b) Pre-Existing Limitations; Deductibles; Service Credit.
With respect to any Benefit Plans of the Parent or any Subsidiary of the Parent
in which any current or former employees participate effective as of the
Effective Time, the Parent shall, or shall cause the Surviving Corporation to:
(A) not impose any limitations more onerous than those currently in effect as to
pre-existing conditions, exclusions (other than such exclusions which would
cause the Parent or the Surviving Corporation to self-insure such excluded
benefits) and waiting periods with respect to participation and coverage
requirements applicable to such current or former employees under any Benefit
Plan, (B) provide each such current or former Employee with credit for any years
of service with the Company or any of its Subsidiaries acknowledged by the
Benefit Plans with respect to employee benefit plans of the Parent or any of its
Affiliates with respect to eligibility, vesting and waiting periods (but not for
purposes of benefit accrual), co-payments and deductibles paid in accordance
with such Benefit Plans, and (C) provide each current or former Employee with
credit for any co-payments and deductibles paid in accordance with such Benefit
Plans.
5.9 Directors' and Officers' Indemnification and Insurance.
(a) After the Effective Time through the sixth anniversary
of the Effective Time, the Surviving Corporation shall indemnify and hold
harmless each present or former officer, director or employee of the Company and
its Subsidiaries (when acting in such capacity), determined as of the Effective
Time (the "Indemnified Parties"), against all claims, losses, liabilities,
damages, judgments, fines and reasonable fees, costs and expenses (including the
reasonable fees and expenses of only one law firm for the Indemnified Parties as
a group) incurred in connection with any claim, action, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to (A) the fact that the Indemnified Party is or was an
officer, director or employee of the Company or any of its Subsidiaries or (B)
50
matters existing or occurring at or prior to the Effective Time (including this
Agreement and the transactions and actions contemplated hereby; it being
understood that a reduction under the Retention Plan in the amount of the
Remaining Pool as a consequence of an Indemnification Amount (as such terms are
defined in the Retention Plan) shall not be subject to indemnification
hereunder), whether asserted or claimed prior to (and, in the case of claims,
actions, proceedings or known investigations, disclosed to the Parent in writing
before the Effective Time), at or after the Effective Time, to the fullest
extent that the Company would have been permitted under Applicable Law and its
certificate of incorporation and by-laws in effect with respect to the date
hereof to indemnify such Indemnified Party. Each Indemnified Party will be
entitled to the fullest extent permitted by Applicable Law and the Company's
certificate of incorporation and by-laws on the date hereof to advancement of
expenses incurred in the defense of any claim, action, proceeding or
investigation from the Surviving Corporation; provided that any Person to whom
expenses are advanced provides an undertaking, to the extent required by the
DGCL, to repay such advances if it is ultimately determined that such Person is
not entitled to indemnification.
(b) Any Indemnified Party wishing to claim indemnification
under paragraph (a) of this Section 5.9, upon learning of any such claim,
action, proceeding or investigation, shall promptly notify the Surviving
Corporation thereof, but the failure to so notify shall not relieve the
Surviving Corporation of any liability it may have to such Indemnified Party to
the extent such failure does not prejudice the indemnifying party. In the event
of any such claim, action, proceeding or investigation (whether arising before
or after the Effective Time), (i) the Surviving Corporation shall have the right
to assume the defense thereof and neither the Parent nor the Surviving
Corporation shall be liable to such Indemnified Parties for any legal expenses
of other counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, except that if the Surviving
Corporation elects not to assume such defense, the Indemnified Parties may
retain counsel satisfactory to the Surviving Corporation, and the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that the Surviving Corporation shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified Parties,
(ii) the Indemnified Parties will cooperate in the defense of any such matter,
and (iii) neither the Parent nor the Surviving Corporation shall be liable for
any settlement effected without the prior approval of the Surviving Corporation
(which approval shall not be unreasonably withheld or delayed); and that neither
the Parent nor the Surviving Corporation shall have any obligation hereunder to
any Indemnified Party if and when a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by Applicable Law.
(c) The Surviving Corporation shall cause to be maintained
in effect for a period of six years after the Effective Time, the current
policies of directors' and officers' liability insurance and fiduciary liability
insurance maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage and amounts
51
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured and which policies may include a "tail policy") with
respect to claims arising from facts or events that occurred at or before the
Effective Time; provided, however, that in no event shall the Surviving
Corporation be required to expend in any one year an amount in excess of 200% of
the annual premiums currently paid by the Company for such insurance (the most
recent annual renewal of which, in the aggregate, cost $318,338, as set forth in
Schedule 4.1(q) to the Company Disclosure Schedule); and, provided, further,
that if the annual premiums of such insurance coverage exceed such amount, the
Surviving Corporation shall be obligated to obtain a policy in its reasonable
judgment with as much coverage as can be obtained for a cost not exceeding such
amount.
(d) In the event that the Surviving Corporation or any of
its successors or assigns (A) consolidates with or merges into any other Person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (B) transfers or conveys all or substantially all of
its properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors or assigns of the Surviving
Corporation shall succeed to the obligations set forth in this Section 5.9.
5.10 Retention Plan and Bonus Pool. At or prior to the
Effective Time, the Company shall establish the Retention Plan for employees of
the Company in the form attached as Schedule 5.10-1 to the Company Disclosure
Schedule (the "Retention Plan") and the Bonus Pool for employees of the Company
(the "Bonus Pool"), as described in Schedule 5.10-2 to the Company Disclosure
Schedule.
5.11 Mutual Covenants of the Company and the Parent. During
the period from the date of this Agreement and continuing until the Effective
Time, each of the Company and the Parent agrees as to itself and its respective
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or as otherwise indicated in Schedule 5.11 of the Company Disclosure
Schedule or Section 5.11 of the Parent Disclosure Schedule or to the extent that
the other party shall otherwise consent in writing):
(a) Preparation of Proxy Statement; Company Stockholders
Meeting. As promptly as practicable following the date hereof, the Company
shall, in cooperation with the Parent, prepare and file with the SEC the Proxy
Statement. The Proxy Statement shall comply as to form in all material respects
with the applicable provisions of the Exchange Act and the rules and regulations
thereunder, and, subject to Section 5.3, shall include a statement that the
Board of Directors finds the Merger to be advisable, fair to and in the best
interests of the Company. The Company shall use all reasonable efforts with the
Parent's cooperation to have the Proxy Statement cleared by the SEC as promptly
as practicable after filing with the SEC. The Company shall, as promptly as
practicable after receipt thereof, provide copies of any written comments
received from the SEC with respect to the Proxy Statement to the Parent and
advise the Parent of any oral comments with respect to the Proxy Statement
received from the SEC. The Company shall cause the Proxy Statement to be mailed
to its stockholders at the earliest practicable date following clearance of the
Proxy Statement by the SEC and, subject to Section 5.3, shall include in the
52
Proxy Statement the recommendation of the Board of Directors of the Company that
the stockholders of the Company vote in favor of the adoption of this Agreement.
The Parent agrees that none of the information supplied or
to be supplied by the Parent for inclusion or incorporation by reference in the
Proxy Statement and each amendment or supplement thereto, at the time of mailing
thereof and at the time of meeting of the Company stockholders, held for the
purpose of obtaining the Required Company Vote with respect to the transactions
contemplated by this Agreement, will contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The Company agrees that none of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in the Proxy Statement and each amendment or supplement thereto, at
the time of mailing thereof and at the time of the meeting of the Company
stockholders, held for the purpose of obtaining the Required Company Vote with
respect to the transactions contemplated by this Agreement, will contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. For purposes of the
foregoing, it is understood and agreed that information concerning or related to
the Parent will be deemed to have been supplied by the Parent and information
concerning or related to the Company and the meeting of the Company
stockholders, held for the purpose of obtaining the Required Company Vote with
respect to the transactions contemplated by this Agreement, shall be deemed to
have been supplied by the Company. The Company will provide the Parent and its
counsel with a reasonable opportunity to review and comment on the Proxy
Statement and all responses to requests for additional information by and
replies to comments of the SEC prior to filing such with, or sending such to,
the SEC, and will provide the Parent and its counsel with a copy of all such
filings made with the SEC. The Company shall consider all comments provided by
the Parent in good faith and no amendment or supplement to the information
supplied by the Parent for inclusion in the Proxy Statement shall be made
without the approval of the Parent, which approval shall not be unreasonably
withheld or delayed.
(b) Reasonable Best Efforts.
(i) Subject to the terms and conditions of this Agreement,
each party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done,
and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable under Applicable
Laws to consummate the Merger and the other transactions
contemplated by this Agreement as soon as practicable after
the date hereof. In furtherance and not in limitation of the
foregoing, each party hereto agrees to make an appropriate
filing of a Notification and Report Form pursuant to the HSR
53
Act with respect to the transactions contemplated hereby as
promptly as practicable after the date hereof and to supply as
promptly as practicable any additional information and
documentary material that may be requested pursuant to the HSR
Act and to take all other actions necessary to cause the
expiration or termination of the applicable waiting periods
under the HSR Act as soon as practicable.
(ii) Each of the Parent and the Company shall, in connection
with the efforts referenced in Section 5.11(b)(i) to obtain
all requisite approvals and authorizations for the
transactions contemplated by this Merger Agreement under the
HSR Act or any other Applicable Law, use its reasonable best
efforts to (A) make all appropriate filings and submissions
with any Governmental Authority that may be necessary, proper
or advisable under Applicable Laws in respect of any of the
transactions contemplated by this Agreement, (B) cooperate in
all respects with each other in connection with any such
filing or submission and in connection with any investigation
or other inquiry, including any proceeding initiated by a
private party, (C) promptly inform the other party of any
communication received by such party from, or given by such
party to, the Antitrust Division of the DOJ or any other
Governmental Authority and of any material communication
received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions
contemplated hereby and (D) consult with each other in advance
of any meeting or conference with the DOJ or any such other
Governmental Authority or, in connection with any proceeding
by a private party, with any other Person.
(iii) In furtherance and not in limitation of the covenants of
the parties contained in Sections 5.11(b)(i) and 5.4(b)(ii),
if any administrative or judicial action or proceeding,
including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Applicable
Law, each of the Parent and the Company shall cooperate in all
respects with each other and use its respective reasonable
best efforts to contest and resist any such action or
proceeding and to have vacated, lifted, reversed or overturned
any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent, that is in effect and
that prohibits, prevents or restricts consummation of the
transactions contemplated by this Agreement. Notwithstanding
the foregoing or any other provision of this Agreement,
nothing in this Section 5.11(b) shall limit a party's right to
terminate this Agreement pursuant to Section 7.1(b) or 7.1(c)
so long as such party has up to then complied in all respects
with its obligations under this Section 5.4(c).
(c) Employee Benefits Matters. The Company and the Parent
agree that, for purposes of the Benefit Plans, the approval or consummation of
the transactions contemplated by this Agreement, as applicable, shall constitute
a "Change in Control", as applicable under such Benefit Plans.
(d) Fees and Expenses. Whether or not the Merger is
consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses, except (i) if the Merger is consummated, the Surviving Corporation
shall pay, or cause to be paid, any and all property or transfer taxes imposed
on the Company or its Subsidiaries and (ii) as provided in Section 7.3. As used
54
in this Agreement, "Expenses" includes all out-of-pocket expenses (including all
fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its Affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby, including the preparation, printing, filing and mailing of
the Proxy Statement and the solicitation of stockholder approvals and all other
matters related to the transactions contemplated hereby.
(e) Confidentiality. Each of the Company and the Parent
will hold any information constituting Confidential Information (as defined in
the Confidentiality Agreement, dated March 14, 2001, as amended, between the
Company and OppenheimerFunds, Inc. (the "Confidentiality Agreement")) provided
to the other, including the information under Section 5.5 that is Confidential
Information, in confidence to the extent required by, and in accordance with,
the provisions of the Confidentiality Agreement.
(f) Public Announcements. The Company and the Parent shall
use all reasonable efforts to develop a joint communications plan and each party
shall use all reasonable efforts (i) to ensure that all press releases and other
public statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by Applicable Law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.
(g) Takeover Statutes. If any anti-takeover or similar
statute or regulation is or may become applicable to the transactions
contemplated hereby, each of the Parent and the Company and its Board of
Directors shall grant such approvals and take all such actions as are legally
permissible so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of any such statute or regulation on the
transactions contemplated hereby.
5.12 Revenue Run Rate. On or prior to the 15th Business Day
following the end of each month prior to the Closing Date, the Company shall
provide to the Parent a certificate of the Company's chief financial officer
setting forth the Revenue Run-Rate as of such month-end (which shall include the
details of the Company's calculations and the Company's confirmation that such
Revenue Run-Rate has been calculated according to the methodology mutually
agreed upon prior to the date hereof by the Parent and the Company (as set forth
in Schedule II hereto) (each, a "Monthly Run-Rate Schedule"). No later than five
Business Days after receipt of such schedule, the Parent may notify the Company
of any disagreement it may have with the information set forth in such Monthly
Run-Rate Schedule and the reasons for such disagreement. The Parent and the
Company will work in good faith to resolve any such disagreement and mutually
agree on the amount of the Revenue Run-Rate as of such month-end within the
following period of five Business Days.
55
5.13 Tangible Net Worth. On or prior to the 15th Business
Day following the end of each month (commencing with August 2001) prior to the
Closing Date, the Company shall provide to the Parent a certificate of the
Company's chief financial officer setting forth the Tangible Net Worth as of
such month-end (which shall include the details of the Company's calculations
and the Company's confirmation that such Tangible Net Worth has been calculated
according to the methodology mutually agreed upon prior to the date hereof by
the Parent and the Company (as set forth in Schedule III hereto) (each, a
"Monthly Tangible Net Worth Schedule"). No later than five Business Days after
receipt of such Monthly Tangible Net Worth Schedule, the Parent may notify the
Company of any disagreement it may have with the information set forth in such
schedule and the reasons for such disagreement. The Parent and the Company will
work in good faith to resolve any such disagreement and mutually agree on the
amount of the Tangible Net Worth as of such month-end within the following
period of five Business Days.
5.14 Employment Agreements. The Company shall use its
reasonable best efforts to enter into amendments, satisfactory to the Parent, to
the employment agreements prior to the Effective Date with the executives
specified on Schedule 5.14 to the Parent Disclosure Schedule.
Article VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of the Company, the Parent and the Merger Sub
to effect the Merger are subject to the satisfaction or waiver at or prior to
the Closing of the following conditions:
(a) Stockholder Approval. The Company shall have obtained
the Required Company Vote for the adoption of this Agreement by the stockholders
of Company.
(b) No Injunctions or Restraints; Illegality. No federal,
state, local or foreign, if any, Applicable Law shall have been adopted or
promulgated, and no temporary restraining order, preliminary or permanent
injunction or other order issued by a court or other Governmental Authority of
competent jurisdiction shall be in effect, having the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger.
(c) HSR Act; Governmental and Self-Regulatory Organization
Approvals. The waiting period (and any extension thereof) applicable to the
Merger under the HSR Act shall have been terminated or shall have expired, and
the written consents set forth on Schedule 6.1(c) of the Parent Disclosure
Schedule shall have been received and shall be in full force and effect.
6.2 Additional Conditions to Obligations of Company. The
obligations of the Company to effect the Merger are subject to the satisfaction
of, or waiver by the Company, at or prior to the Closing of the following
additional conditions:
56
(a) Representations and Warranties. Each of the
representations and warranties of the Parent and the Merger Sub set forth in
this Agreement shall be true and correct in all material respects (other than
any representation or warranty, or any portion of a representation or warranty,
that is qualified as to materiality or Material Adverse Effect, which
representations and warranties (or such portions thereof) shall be true and
correct in all respects), as if such representations or warranties were made as
of the Effective Time, except (i) to the extent given as of a certain date and
(ii) for changes specifically permitted by this Agreement, and the Company shall
have received a certificate of the chief executive officer and the chief
financial officer of the Parent to such effect.
(b) Performance of Obligations of the Parent. The Parent
shall have performed or complied in all material respects with all agreements
and covenants required to be performed by it under this Agreement at or prior to
the Effective Time, and the Company shall have received a certificate of the
chief financial officer and one other executive officer of the Parent to such
effect.
(c) Retention Plan and Bonus Pool. The Parent shall have
taken all action necessary to ensure that the Retention Plan and the Bonus Pool
shall be in full force and effect following the Effective Time.
6.3 Additional Conditions to Obligations of the Parent and
the Merger Sub. The obligations of the Parent and the Merger Sub to effect the
Merger are subject to the satisfaction of, or waiver by the Parent, at or prior
to the Closing of the following additional conditions:
(a) Representations and Warranties. Each of the
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all material respects (other than any representation or
warranty, or any portion of a representation or warranty, that is qualified as
to materiality or Material Adverse Effect, which representations and warranties
(or such portions thereof) shall be true and correct in all respects), as if
such representations or warranties were made as of the Effective Time, except
(i) to the extent given as of a certain date and (ii) for changes specifically
permitted by this Agreement, and the Parent shall have received a certificate of
the co-chief executive officers and the chief financial officer of the Company
to such effect.
(b) Performance of Obligations of Company. The Company
shall have performed or complied in all material respects with all agreements
and covenants required to be performed by it under this Agreement at or prior to
the Effective Time, and the Parent shall have received a certificate of the
chief executive officer and the chief financial officer of the Company to such
effect.
(c) No Material Adverse Effect. Since the date of this
Agreement, there shall not have occurred any event or circumstance that shall
have caused, or would be reasonably likely to cause, a Material Adverse Effect
with respect to the Company.
57
(d) Revenue Run-Rate. The Closing Revenue Run-Rate shall
not be less than 85% of the Base Revenue Run-Rate.
(e) Employment Agreements. The Employment Agreements,
between OppenheimerFunds, Inc. and the individuals listed on Schedule 6.3(e) of
the Parent Disclosure Schedule (the "Key Employees") shall be in full force and
effect, the Parent shall not be aware of any basis that would reasonably be
expected to cause any of such agreements to no longer be in full force and
effect, and none of the Key Employees shall have died, become incapacitated or
otherwise not be in a position to perform his or her obligations thereunder.
(f) Dissenters. The Dissenting Shares shall constitute not
more than ten percent (10%) of the Company Common Stock outstanding immediately
prior to the Effective Time.
(g) Retention Plan and Bonus Pool. The Retention Plan and
the Bonus Pool shall have been adopted by the Company and shall be in full force
and effect.
Article VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (except as
provided below), notwithstanding any approval of this Agreement by the Required
Company Vote:
(a) By mutual written consent of the Parent and the
Company, by action of their respective Boards of Directors;
(b) By either the Company or the Parent, by written notice
to the other party if the Merger has not been consummated as of December 31,
2001 (the "Termination Date"); provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to any party
whose failure to fulfill in any material respect any obligation under this
Agreement has caused or resulted in the failure of the Effective Time to occur
on or before the Termination Date;
(c) By either the Company or the Parent, if there shall be
any law or regulation that materially restricts the consummation of the Merger
or makes consummation of the Merger illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining the Parent or the Company from
consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable; provided that the terminating party
has fulfilled its obligations under Section 5.11(b);
(d) By the Parent, if (i) the Board of Directors of the
Company shall have (A) failed to recommend, (B) failed to reconfirm its
recommendation of this Agreement within three Business Days after a written
request by the Parent to do so, (C) withdrawn or modified or changed, in a
manner adverse to the Parent, its approval or recommendation of this Agreement
58
or the Merger, whether or not permitted by the terms hereof, (D) failed to call
a meeting of the Company stockholders for the purpose of obtaining the Required
Company Vote with respect to the transactions contemplated by this Agreement, or
(E) recommended an Acquisition Proposal, (ii) the Required Company Vote shall
not have been obtained on or prior to December 30, 2001, or (iii) a tender offer
or exchange offer for 15% or more of the outstanding Company Common Stock is
commenced, and the Board of Directors of the Company fails to recommend against
acceptance of such tender offer or exchange offer by the stockholders of the
Company within the time period required pursuant to Rule 14e-2 of the Exchange
Act (or the Board of Directors of the Company shall resolve or fail to resolve,
as applicable, to do any of the foregoing);
(e) By the Parent, if the condition set forth in Section
6.3(e) shall have become incapable of fulfillment, and shall not have been
waived by the Parent;
(f) By either the Company or the Parent, if there shall
have been a breach by the other party of any of its representations, warranties,
covenants or obligations contained in this Agreement, which breach would result
in the failure to satisfy one or more of the conditions set forth in Article VI
and in such case such breach shall be incapable of being cured, or, if capable
of being cured, shall not have been cured within 30 days after written notice
thereof shall have been received by the party alleged to be in breach; provided,
however, that the right to terminate this Agreement pursuant to this Section
7.1(f) shall not be available to the Company or the Parent, if such party, at
such time, is in material breach of any representation, warranty, covenant or
agreement set forth in this Agreement; or
(g) By the Company, at any time that the Company is not in
material breach of Section 5.3 and prior to the time at which the Required
Company Vote shall have been obtained if (i) after receiving a bona fide
Superior Proposal, the Board of Directors of the Company determines, in good
faith and after consulting with, and based upon the advice of, outside legal
counsel, that taking such action is required to comply with its fiduciary duties
to the Company's stockholders under Applicable Law, (ii) the Board of Directors
of the Company notifies the Parent and Merger Sub in writing that it intends to
enter into such agreement, attaching the most current version of such agreement
to such notice, (iii) during the five Business Days following receipt of the
Company's written notification of its intention, (A) the Company shall have
negotiated with, and shall have caused its financial and legal advisors to have
negotiated with, the Parent to attempt to make such commercially reasonable
adjustments in the terms and conditions of this Agreement as would enable the
Company to proceed with the transactions contemplated herein, and (B) the Board
of Directors of the Company shall have determined, after considering the results
of such negotiations and any revised proposals made by the Parent, that any
Superior Proposal giving rise to the Company's notice continues to be a Superior
Proposal, (iv) simultaneously with such termination the Company pays to the
Parent in immediately available funds the Termination Fee and Expenses described
in Section 7.3, and (v) such termination (A) is within two Business Days after
the termination of the five-Business Day period referred to in clause (iii)
above and (B) takes place prior to receipt of the Required Company Vote. The
59
Company agrees that it will not enter into a binding agreement or consummate the
transaction constituting a Superior Proposal referred to in clause (iii) above
until at least the sixth Business Day after it has provided the notice to the
Parent required thereby.
The party desiring to terminate this Agreement pursuant to clause (b), (c), (d),
(e), (f) or (g) of this Section 7.1 shall give written notice of such
termination to the other party in accordance with Section 8.4, specifying the
provision hereof pursuant to which such termination is effected.
7.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 7.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except (i) as set forth in Section
7.3, (ii) that the agreements contained in this Section 7.2, in Section 5.11(d),
and in the Confidentiality Agreement (other than the provisions of paragraphs 7
and 9 therein, which paragraphs, the parties thereto hereby agree, shall be of
no further force and effect upon termination of this Agreement) shall survive
the termination hereof and (iii) no such termination shall relieve any party of
any liability or damages resulting from any willful breach by that party of this
Agreement.
7.3 Payment by the Company.
(a) In the event that (i) this Agreement is terminated by
the Parent pursuant to Section 7.1(d) or Section 7.1(e) (other than pursuant to
Section 7.1(e), by reason of death of any of the individuals referred to in
Section 6.3(e) or by the Company pursuant to Section 7.1(g), or (ii) if within
18 months of the termination of this Agreement by the Company pursuant to
Section 7.1(b) any Acquisition Proposal by a third party is entered into, agreed
to or consummated by the Company, then, in any such event, the Company shall pay
the Parent a fee of $5,800,000 (the "Termination Fee") (which amount shall be
payable by wire transfer in immediately available funds to an account designated
by the Parent) on the date of such termination, in the case of clause (i), or
the earlier of the date an agreement is entered into with respect to an
Acquisition Proposal or an Acquisition Proposal is consummated in the case of
clause (ii).
(b) In the event that the Parent terminates this Agreement
pursuant to Section 7.1(f), then the Company shall pay in same-day funds to the
Parent, within two-Business Days after demand is made by the Parent, the
Parent's Expenses. No such payment to the Parent will be deemed to affect or
limit any claims that the Parent may have under Applicable Law in respect of
such termination.
(c) The Company acknowledges that the agreements contained
in this Section 7.3 are critical provisions of the transactions contemplated
hereby and that without these agreements the Parent and Merger Sub would not
enter into this Agreement. Accordingly, if the Company fails to pay promptly the
Termination Fee due pursuant to this Section 7.3(a) and, in order to obtain such
payment, the Parent or Merger Sub commences litigation which results in a
judgement against the Company for the Termination Fee, the Company shall pay to
the Parent its costs and expenses (including attorneys' fees) in connection with
such litigation, together with interest on the amount of the Termination Fee at
60
the prime rate of Citibank, N.A., in effect on the date and from the date such
amounts were originally required to have been paid.
Article VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and
Agreements. None of the representations, warranties, covenants and other
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants and other agreements, shall survive the
Effective Time, except as otherwise contemplated by the Retention Plan and for
those covenants and agreements contained herein and therein that by their terms
apply or are to be performed in whole or in part after the Effective Time.
Nothing in this Section 8.1 shall relieve any party for any breach of any
representation, warranty, covenant or other agreement in this Agreement
occurring prior to termination.
8.2 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of the Company and the Merger Sub, but, after any
such approval, no amendment shall be made which by Applicable Law or in
accordance with the rules of any relevant stock exchange requires further
approval by such stockholders without such further approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
8.3 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (a) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.
8.4 Notices. All notices and other communications hereunder
shall be in writing (including telecopy or other similar writing) and shall be
deemed duly given (a) on the date of delivery if delivered personally, or by
telecopy or telefacsimile, upon confirmation of receipt, (b) on the first
Business Day following the date of dispatch if delivered by a recognized
next-day courier service, (c) on the tenth Business Day following the date of
mailing if delivered by registered or certified mail, return receipt requested,
postage prepaid or (d) if given by any other means, when received at the address
specified in this Section 8.4, except, in each case, for a notice of a change of
address, which shall be effective only upon receipt thereof. All notices
61
hereunder shall be delivered as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive such
notice:
(a) If to the Parent or the Merger Sub, to
Xxxxxxxxxxx Acquisition Corp.
Attn: President
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copies to
Xxxxxxxxxxx Acquisition Corp.
Attn: General Counsel
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Xxxxxx Xxxxxxxxxx, Esq.
Xxxxxxx X. Xxxxx, Esq.
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
(b) If to the Company to
Tremont Advisers, Inc.
Attn: President
000 Xxxxxxxx Xxxxx Xxxxxx, Xxxxx 000X
Xxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copy to
Xxxxx Xxxxxx, Esq.
Xxxxxxx X. D'Oench, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
62
8.5 Interpretation. When a reference is made in this
Agreement to Sections, Annexes or Schedules, such reference shall be to a
Section of or Annex or Schedule to this Agreement unless otherwise indicated.
The table of contents, glossary of defined terms and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The inclusion of any matter in the
Company Disclosure Schedule or the Parent Disclosure Schedule in connection with
any representation, warranty, covenant or agreement that is qualified as to
materiality or "Material Adverse Effect" shall not be an admission by the party
delivering such disclosure schedule that such matter is material or would
reasonably be expected to have a Material Adverse Effect.
8.6 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when each party shall have received counterparts
hereof signed by all other parties hereto, it being understood that the parties
need not sign the same counterpart.
8.7 Entire Agreement; Third Party Beneficiaries.
(a) This Agreement together with the Company Disclosure
Schedule, the Parent Disclosure Schedule and Annexes hereto, the Consent and
Voting Agreement and the Confidentiality Agreement constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof.
(b) This Agreement shall be binding upon and inure solely
to the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement, other
than Section 5.9 (which is intended to be for the benefit of the Persons covered
thereby and may be enforced by such Persons).
8.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
8.9 VENUE. EACH PARTY (a) CONSENTS TO SUBMIT ITSELF TO THE
PERSONAL JURISDICTION OF ANY FEDERAL COURT OR NEW YORK STATE COURT LOCATED IN
THE STATE AND CITY OF NEW YORK IN THE EVENT ANY DISPUTE ARISES UNDER OR RELATES
TO THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED HEREIN, (b) AGREES IT WILL NOT
ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST
FOR LEAVE FROM ANY SUCH COURT, INCLUDING, WITHOUT LIMITATION, A MOTION TO
DISMISS ON THE GROUNDS OF FORUM NON CONVENIENS AND (c) AGREES THAT IT WILL NOT
63
BRING ANY ACTION ARISING UNDER OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREIN IN ANY COURT OTHER THAN A FEDERAL COURT OR NEW YORK STATE
COURT SITTING IN THE STATE AND CITY OF NEW YORK.
8.10 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (a) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (b) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (c) IT MAKES THIS WAIVER
VOLUNTARILY AND (d) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.10.
8.11 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Applicable
Law or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
8.12 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto, in whole or in part (whether by operation of Applicable Law or
otherwise), without the prior written consent of the other parties, and any
attempt to make any such assignment without such consent shall be null and void,
except that Merger Sub may assign, in its sole discretion, any or all of its
rights, interests and obligations under this Agreement to any direct or indirect
wholly owned Subsidiary of the Parent without the consent of the Company, upon
which all references in this Agreement to Merger Sub shall thereafter be deemed
to be references to such assignee for all purposes under this Agreement. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
64
8.13 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at Applicable
Law or in equity.
8.14 Other Agreements. The parties hereto acknowledge and
agree that, except as otherwise expressly set forth in this Agreement, the
rights and obligations of the Company and the Parent under any other agreement
between the parties shall not be affected by any provision of this Agreement.
[SIGNATURES BEGIN ON THE NEXT PAGE]
65
IN WITNESS WHEREOF, the Parent, the Merger Sub and the
Company have caused this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the day and year first above written.
XXXXXXXXXXX ACQUISITION CORP.
By: /s/ Xxxxxx Xxxxxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Chief Financial Officer and
Treasurer
XXXXXX ACQUISITION CORP.
By: /s/ Xxxxxx Xxxxxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Vice President and Treasurer
TREMONT ADVISERS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President and Co-Chief
Executive Officer
66
